FDICIA imposes increasingly severe operating restrictions on undercapitalized banks (those in Zones 3, 4, and 5). Explain why these restrictions are appropriate. Describe how managers should respond to these restrictions if they manage an undercapitalized bank.
Answer to relevant QuestionsSome analysts believe that the new Basel III minimum capital requirements are excessive and will reduce bank profitability, ceteris paribus. Summarize these arguments. Suppose that a bank wants to grow during the next year but does not want to issue any new external capital. Its current financial plan projects a ROA of 1.25 percent, a dividend payout rate of 35 percent, and equity to asset ...What motivation encourages commercial banks to make variable rate mortgages? Why are variable rate mortgage rates normally below fixed mortgage rates? As the level of rates declines, would you expect banks to increase or ...Describe how each of the following helps a bank control its credit risk: a. Loan covenants b. Risk rating systems c. Position limits Explain how a company’s permanent working capital needs differ from its seasonal working capital needs.
Post your question