1. What is the cumulative repricing gap if the planning period is? 

2. What will happen to the net interest income of the bank, if interest on the banks rate sensitive assets is forecasted to decrease by 60 basis points and rate-sensitive liabilities to increase 25 basis points in 6 months’ time?

3. Due to the uncertainty in the economy, based on the bank’s estimate there is a potential of decrease in the demand deposits. What are some of the impact may that have on the bank’s overall asset-liability? 

4. Does the bank have sufficient liquid capital to cushion any unexpected losses as per the Basle III requirement? (Ignore cyclical buffer requirement)?

Part II

The following is the balance sheet of a VRY-SMPL Bank. All the items are recorded based on the book value and they were purchased at so value,

5. Assume current market yield is flat at 6.5% p.a. What is the duration gap of the bank?

6. Using the duration gap estimated from question 6, what will happen to the net worth of the bank if the market yield goes up by 1.5%p.a.? 

7. What is the maturity gap of the bank? 

8. What are some of the requirements (and issues) faced by the financial institutions in trying to meet these new requirements?

PART III

The Basel Banking supervision committee has proposed the Basle III standards.

• Compare and discuss the differences between Basle II and the Basle III.

Answer rating: 100% (QA)

Part 1 1 What is the cumulative repricing gap if the planning period is a 3 month Repricing gap using a 3month planning period 0 150 150 million b 2 year Reprising gap using a 2year planning period As... View the full answer