What is the leverage capital ratio and why do regulators specify a minimum for it?
Answer to relevant QuestionsFDICIA 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 ...Many analysts argue that RBC requirements should force banks to raise loan rates. Explain this by assuming that a bank’s management sets loan rates to earn a 16 percent ROE. How does the allocation of equity to a loan ...Explain how banks move loans off the balance sheet. What motivates different types of off- balance sheet activities? Discuss the risks these actions involve. Suppose that you are considering making a working capital loan to a business customer of your bank. You do the cash to cash cycle analysis and determine that the firm’s daily average cost of goods sold is $ 50,000. What ...Explain what it means to “perfect the bank’s security interest” in collateral. When lending to a small business owner who is an owner/ manager, what methods might the bank use to perfect its interest in the collateral ...
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