Risk Management project, Risk Management

Assignment Help:
Imagine you are the Chief Risk Officer of a newly-formed bank, with a focus on corporate lending in Slovakia. The bank is largely funded by local deposits. The CEO (and so does the regulator) wants to know if sufficient capital has been allocated against assets, and what provisioning policy should be. He would also like your views on pricing of loans and deposits, so that the bank can make a decent profit while making competitive headway without excessive risk. The bank takes small positions in trading local government bonds. The CEO would also like you to assess the bank’s VAR, as well as liquidity, to be sure no undue risks are being taken.

Following is the financial position of the bank after the first year of operations:

Assets (Euro millions)

Cash 194
Due from banks 86
Securities 1200
Gross loans 2700
Loan loss reserves (LLRs) -150
Fixed assets 75
Other assets 175
Total assets 4280

Liabilities & Equity

Deposits 2573
Due to banks 782
Market funds 200
Other liabs 196
Equity 529
Tot liabs & equity 4280

Income Statement

Int inc 300
Int exp -170
=Net int inc 130
Trading inc 20
Net fee & comm. Inc 30
=Optg inc 180
Personnel exp -55
Other optg exp -70
D&A -13
=Pre-prov inc (PPI) 42
Loan loss provisions (LLPs) -29
=P-t inc 13
Tax -3
=Net inc 10
In addition to the above requests from the CEO, he would also like your input on measures to reduce operational risk, and what dividend policy should be.

The bank’s €2.7 billion gross loan book is rated as follows:
€1 billion of BBB rated loans,
€1 billion of BB rated loans
€500 million of B rated loans
€200 million of CCC rated loans. There are no collateralized loans or off-b/s items.

Securities of €1.2 billion are all invested in A rated government bonds.

VAR = 553 mm

Loans are evenly divided between 1, 2 and 3 years’ maturity.

Deposits are 50% demand (due at any time), 25% in 9 months, and 25% over 1 year.

Market debt is of 2 years’ maturity.

Please formulate your recommendations to the CEO (me). Thank you

Related Discussions:- Risk Management project

Define value at risk as a measure of market risk, Black Rock Investors is ...

Black Rock Investors is managing the pension fund of Virgin Atlantic. Sir Richard Branson wants to assess the risk of the portfolio following the Euro crisis. During a discussion

Business swap, explain the risk involves in swap business

explain the risk involves in swap business

Data security, Data Security: An important issue for all organisations ...

Data Security: An important issue for all organisations is the security of data. Just as documentation require physical security in the face of risk of theft / fire etc, electr

Importance or advantage of the working capital, Q. Importance or advantage ...

Q. Importance or advantage of the working capital? Working capital is the lifeblood and never centres of the business. Just like a blood ,that necessary , no business can run w

Identify the entities for managing risks and controls, QUESTION Mybank ...

QUESTION Mybank Commercial Bank is a global conglomerate with operations in more than 10 countries and with more than 25,000 employees across the globe. The bank's technology t

Explain main objectives of a marine park, Question: (i) Describe a Mari...

Question: (i) Describe a Marine Protected Area; what are the types of Marine Protected Areas that exist in the Republic of Mauritius, naming one example of each (ii).

Internal control, policies for non-cash generating assets

policies for non-cash generating assets

Bankruptcy of lehman brothers, In its early stages, the financial crisis ma...

In its early stages, the financial crisis manifested itself as an acute liquidity shortage among financial intermediaries. In this phase, concerns over the solvency of the sophisti

What is industry risk, What is Industry Risk An industry may be view...

What is Industry Risk An industry may be viewed as group of companies which compete with each other to market a homogeneous product. Industry risk is that portion of an  inv

LIability risk, Michael went deer hunting with Ed. After seeing bushes move...

Michael went deer hunting with Ed. After seeing bushes move, Michael quickly fired his rifle at what he thought was a deer. However, Ed caused the move- ment in the bushes and was

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd