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

Measure of market risk, Question: DGI Investors is responsible for man...

Question: DGI Investors is responsible for managing the investment portfolio of Carnegie University Trust which has a market value of $ 100m. The new appointed chairman of t

What is material safety data sheet, Q. What is Material Safety Data Sheet ?...

Q. What is Material Safety Data Sheet ? 1. Material Safety Data Sheet is a formal document containing important information about the characteristics and actual or potential ha

Insurance, insurance is a pool of risk?discuss

insurance is a pool of risk?discuss

Four critical components of risk-management integrity, The purpose of this ...

The purpose of this memorandum is to outline in sufficient detail the terms of the audit engagement. In planning the audit engagement for Toy Local Corporation for the year ended O

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

Question 1: (a) Employers should conduct proper health risk assessment in order to identify and control health risks before they lead to losses. Describe the four stages invo

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

Define the regulation risk - non-systematic risk, Define the Regulation Ris...

Define the Regulation Risk - Non-Systematic Risk Some  investments  can  be  comparatively attractive  to  other investments  due to certain  regulations  or  tax  laws  which

Risk assessment - portfolio management, 1. You are given the following long...

1. You are given the following long-run annual rates of return for alternative investment instruments: US Government T-Bills 3.5% Large-cap common stocks 12.1% Long-

Discuss the potential health risk, Question: (a) Discuss the potential...

Question: (a) Discuss the potential health risk which composting can pose to workers or to those located near a facility. (b) A number of concerns have been identified in

American risk and insurance association, It is a professional organization ...

It is a professional organization for associates and academics in the insurance sector. The American Risk and Insurance Association comprises of scholars, carriers and individuals

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