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Finance Case study III

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CASE STUDY INSTRUCTIONS

The following articulates the overall basic procedure and presentation details for last phase of your case.

PURPOSE

The purpose behind the case study is: (1) to anchor your awareness of the financial structure of financial institutions – in particular, a commercial bank; (2) further your financial analysis skills; and (3) broaden your understanding of the risks and strengths inherent in commercial banking.

For this last Part, the purpose and objective are detailed and precise:

Section 1:

  • Using data previously calculated in Parts I and II, assess the soundness of your bank. Referring back to the most recent annual financial data used in your case, answer the following:
    • What level of risk does your bank face, as defined by (a) destruction of CET1 capital due to loan failure, (b) liquidity crisis due to destruction of readily available capital from OBS liabilities exercise or default?
    • What percent of loans (and their notional value) need to fail before the bank’s capital destruction leads to regulatory action?
    • What percent of OBS liabilities default (and their notional value) would lead to regulatory action?
    • Does the composition of bank’s loan portfolio and/or its OBS liability structure suggest unusual risks to the bank that are not ameliorated by means of hedges?

Section 2:

  • Then answer these questions:
  • Identify the risks inherent in banking, and identify methods used by banks to manage these risks.
  • Discuss what fractional banking means and why this has required governmental authorities to regulate banking activity.
  • Discuss the Basel III convention, focusing on what the convention was trying to achieve.

PROCEDURE

Your narrative, when submitted, should contain as a minimum the following:

Contents (written, no more than 5 pages, typed, no less than 11 PICA – any narrative in excess of five pages WILL NOT BE READ):

  • For Section 1, provide a summary of key financial findings –
    • This is a cut-and-paste of the calculations requested in Parts I and II. IF I HAVE SUGGESTED OR STATED OUTRIGHT THAT YOUR CALCULATIONS WERE SUSPECT, YOU HAVE THIS OPPORTUNITY TO CORRECT THEM, BASED ON THE REVIEWS WE DID IN CLASS
  • For Section 1: ANSWER ALL QUESTIONS IN ORDER. COPY THE TEXT OF THE QUESTION TO ANSWERED.
  • For Section 2: ANSWER ALL QUESTIONS IN ORDER. COPY THE TEXT OF THE QUESTION TO ANSWERED.

Upload directly to Canvas; I will only accept paper copies on an emergency basis.

DUE DATE:

August 19, 2019, 11:59pm.

RUBRIC FOR GRADING IS AS FOLLOWS   –   60 POINTS TOTAL:

  DOES NOT MEET MINIMUM – DOESN’T UNDERSTAND AT ALL GRADE: 50% OR LESS OF MAX PTS MEETS MINIMUM – MERELY GETS THE JOB DONE – FOLLOWS INSTRUCTIONS GRADE: 50 – 65% OF MAX PTS ABOVE AVERAGE – I.E., THINKS    GRADE: 65 – 85% OF MAX PTS OUTSTANDING – I.E., THINKS OUTSIDE THE BOX   85 – 100% OF MAX PTS.
DEGREE OF KNOWLEDGE AND COMPREHENSION OF CLASS MATERIAL.  MAXIMUM POINTS: 25 FAILS TO RECOGNIZE THE CASE SUBJECT’S ISSUES AND/OR FAILS TO UNDERSTAND THE NATURE AND PURPOSE OF THE CASE STUDY. DEMONSTRATES AN UNDERSTANDING OF THE PROBLEM ONLY. NO FURTHER RELEVANT ELABORATION DEMONSTRATES A THOROUGH UNDERSTANDING OF THE SUBJECT’S FINANCIAL STRUCTURE AND ITS RAMIFICATIONS. DEMONSTRATES A THOROUGH UNDERSTANDING OF THE SUBJECT’S FINANCIAL STRUCTURE AND ITS RAMIFICATIONS. RELATES THE PROBLEM TO RECENT PRACTICES, AND/OR USES OTHER SOURCES TO EXPLAIN PROBLEM RAMIFICATIONS
ANALYSIS & LOGIC OF ANALYSIS MAXIMUM POINTS: 15 FAILS TO REACH LOGICAL CONCLUSIONS FROM DATA PRESENTED. REACHES BASIC CONCLUSIONS. REACHES CONCLUSIONS WHICH DEMONSTRATE THOROUGH UNDERSTANDING OF THE ANALYSIS. REACHES CONCLUSIONS WHICH DEMONSTRATE A THOROUGH UNDERSTANDING OF THE ANALYSIS AND THE ABILITY TO PLACE IN HISTORIC OR CURRENT CONDITION CONTEXT.
OFFERED CONCLUSIONS  MAXIMUM POINTS: 10 NONE OFFERED. OFFEREED SOME CONCLUSION, NOT STRONGLY THOUGHT OUT OFFERED CONCLUSION WITH LOGIC AND FORESIGHT. OFFERED CONCLUSION WITH EXCEPTIONAL SOPHISTICATION – THOUGHT “OUTSIDE THE BOX”.
SOPHISTICATION OF PRESENTATION  MAXIMUM POINTS: 10 USES LESS THAN HIGH SCHOOL ENGLISH, SLANG, AND TEXT JARGON. (IN FACT, IS IT REALLY ENGLISH?) USES UNDERGRADUATE-LEVEL LANGUAGE; NOTHING SPECIAL. DEMONSTRATES GOOD VERBAL SKILLS AND A SOPHISTICATED VOCABULARY. DEMONSTRATES OUTSTANDING VERBAL SKILLS AND HIGHLY EFFECTIVE AND SOPHISTICATED VOCABULARY.
 
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