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

Explain the risk management strategies, Explain the Risk management strateg...

Explain the Risk management strategies Retain the risk If risk is small and won't affect company's profits, company does very little and lives with i

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

Trade Finance and Risk, The risks in the transaction seem to be very broad ...

The risks in the transaction seem to be very broad and encompassing. Can Engineering Tech effectively protect its interests and assure payment?

Finance , #qusuppose that a bank sole business is to lend in two region of ...

#qusuppose that a bank sole business is to lend in two region of the world. The lending in each region Has the same characteristic as in example 21.5 of section 21.8. Lending to

Explain the meaning of risk management, Explain the meaning of risk managem...

Explain the meaning of risk management to an organisation Concept of risk: • What is risk? • Risk and decision making • Types of strategic risk • Six steps to managing strate

Principles of risk communication, Principles of Risk Communication Kno...

Principles of Risk Communication Know  the  Audience In formulating risk communication messages, the audience should be analyzed to understand  their motivations and opini

Explain the use of hani-raafat risk calculator, Question 1: (i) Descri...

Question 1: (i) Describe five steps to risk assessment for work-related driving activities. (ii) List ten important points which employers should consider to ensure that wo

What is the maximum amount of money the company, The marketing department o...

The marketing department of a vitamin water company wishes to determine the maximum expected payoff from introducing a new strawberry drink. What decision, in terms of choosing the

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