Suppose that a bank has a return on equity capital of 12 percent and that its retention ratio is 35 percent. How fast can this bank's assets grow without reducing its current ratio of capital to assets? Suppose that the bank's earnings (measured by ROE) drop unexpectedly to only two-thirds of the expected 12 percent figure. What would happen to the bank's ICGR?
Answer to relevant QuestionsWhat evidence does recent research provide on the role of the private marketplace in determining capital standards?Please indicate which items appearing on the following financial statements would be classified under the terms of the regulatory requirement for (a ) Tier 1 capital or (b ) Tier 2 capital. Over the Hill Savings has been told by examiners that it needs to raise an additional $8 million in long-term capital. Its outstanding common equity shares total 5.4 million, each bearing a par value of $1. This thrift ...What should a good written loan policy contain?The lending function of depository institutions is highly regulated and this chapter gives some examples of the structure of these regulations for national banks. In this problem you are asked to apply those regulations to ...
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