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Principles of Banking - N1577
Seminar 10
Bank Regulation
Question 1.
Simple Bank plc has the following balance sheet (bil pounds)
|
Liabilities |
Assets |
|
Equity: 15 |
Cash: 2 |
|
Disclosed reserves: 2 |
OECD government bonds: 30 |
|
Subordinated debt: 5 |
Interbank loans: 20 |
|
Customer funding: 180 |
Mortgages: 50 |
|
Loan loss reserves: 3 |
Company loans: 103 |
|
TOTAL: 205 |
TOTAL 205 |
* All interbank loans are to banks located in OECD countries
Assuming the Basel 1 Accord applies, what is the Basel 1 risk asset ratio?
Question 2.
Discuss the rationale for the regulation of banks.
Question 3.
The government safety net creates both an adverse selection problem and amoral hazard problem. Discuss.
Question 4.
Discuss the main limitations of banking regulation.