a) What is Asset Liability Management? Enumerate the roles andresponsibilities of the various governance structures available toa bank with regard to its interest rate risk management. b) What isInterest Rate Risk? Mention and explain the various sources ofinterest rate risk in a typical banking book. c) A bank has thefollowing balance sheet extract as at 31st March 2018. Using thetable above, i) Calculate 1-year; (a) Rate Sensitive assets (RSAs)(b) Rate Sensitive Liabilities (RSLs) (c) 1-year re-pricing Gap ofthe bank ii) What is the gap ratio of the bank? iii) What is theimpact of 2% increase in interest rate on the bankâs net interestincome over 1-year period? iv) Suppose interest rate increase by2.5% on assets and 2% on liabilities over the next 1-year.Calculate the cumulative impact on the 1-year Net Interest Incomeof the bank. Question 2 The Treasurer of Esabelle Company Ltd hasforecasted that the company will have excess cash in the next 12months and is therefore looking for a place to invest. As atreasury consultant advise the treasurer with regard to thefollowing: a) The things to consider before investing b) Theavailable Investment products on the Ghanaian financial market c)The various investment strategies he can adopt and considerationsthat should be made before adopting such strategies. Question 3 a)Explain what is meant by Bank Credit Creation and Cash ReserveRequirement b) Ansaba Bank Ltd received GHS 1m deposit from one ofits trusted customers who had hidden the cash under his pillowsince 1st July 2007 on 15 November 2017. The bank is required bylaw to keep 10 % of all its customer deposit with the Central Bankin a non-interest bearing current account. i) Calculate the maximumloan Ansaba Bank can grant with this loan if the bank does not keepany excess reserve ii) Suppose the number of banks in the economyis 5, how much loans can be created? What if the number of banks inthe economy is infinite? iii) Explain two mechanisms the centralbank can use to influence credit creation in the economy. iv) TheBank of Ghanaâs Monetary Policy Committee (MPC) has reduced thePolicy rate cumulatively by 300 basis points since the beginning ofthe year. Explain briefly the impact the reduction in the policyrate will have on the economy of Ghana. Question 4 a) The followingextracts were taken from the Bank of Ghana websites as at 23rd June2018: 91-Day Treasury Bill Rate-13.3251% Interbank Rate-16.23%Monetary Policy Rate-17% Using the above information and the newmodel, calculate the Ghana Reference Rate as at 23rd June 2018. Thecurrent Cash Reserve Requirement (CRR) is 10% and the industryagreed Cash in Vault (CIV) limit is 2%. b) The following extractswere taken from the balance sheet for the month ended 31st March2018 for Bank XYZ which has been operating in Ghana for the past 20years. Products Balances (GHS m) Customer Rate Personal Loans(Floating) 350 GRR + 5% Corporate Loans (Floating) 565 GRR+4% Timedeposits(1yr maturity) 300 GRR-3% Savings 500 GRR-10% In additionthe following data is available: 91-day Treasury bill rate isforecasted to reduce by 200bps over the next 1 year, whilst theMonetary Policy and the Interbank Overnight Rates are forecasted todecline by 300bps and 250bps respectively. i) State the variousinterest rates on the bankâs products. What is the Bankâs NetInterest margin? ii) Suppose the forecasted interest rates aretrue, calculate the impact on the bankâs net interest margin in thenext 1 year. iii) Repeat (ii) assuming the bank is able to pass ononly 50% and 75% of the rate change to its liability and assetscustomers respectively. iv) The bankâs internal funds transferpricing to the Corporate Banking unit is 18.5%. At a managementmeeting held recently, the Corporate Director was not happy withthe internal funding rate as he claims it is making pricingunprofitable. Do you agree with his complain? Explain your answer.a) What is Asset Liability Management? Enumerate the roles andresponsibilities of the various governance structures available toa bank with regard to its interest rate risk management. b) What isInterest Rate Risk? Mention and explain the various sources ofinterest rate risk in a typical banking book. c) A bank has thefollowing balance sheet extract as at 31st March 2018. Using thetable above, i) Calculate 1-year; (a) Rate Sensitive assets (RSAs)(b) Rate Sensitive Liabilities (RSLs) (c) 1-year re-pricing Gap ofthe bank ii) What is the gap ratio of the bank? iii) What is theimpact of 2% increase in interest rate on the bankâs net interestincome over 1-year period? iv) Suppose interest rate increase by2.5% on assets and 2% on liabilities over the next 1-year.Calculate the cumulative impact on the 1-year Net Interest Incomeof the bank. Question 2 The Treasurer of Esabelle Company Ltd hasforecasted that the company will have excess cash in the next 12months and is therefore looking for a place to invest. As atreasury consultant advise the treasurer with regard to thefollowing: a) The things to consider before investing b) Theavailable Investment products on the Ghanaian financial market c)The various investment strategies he can adopt and considerationsthat should be made before adopting such strategies. Question 3 a)Explain what is meant by Bank Credit Creation and Cash ReserveRequirement b) Ansaba Bank Ltd received GHS 1m deposit from one ofits trusted customers who had hidden the cash under his pillowsince 1st July 2007 on 15 November 2017. The bank is required bylaw to keep 10 % of all its customer deposit with the Central Bankin a non-interest bearing current account. i) Calculate the maximumloan Ansaba Bank can grant with this loan if the bank does not keepany excess reserve ii) Suppose the number of banks in the economyis 5, how much loans can be created? What if the number of banks inthe economy is infinite? iii) Explain two mechanisms the centralbank can use to influence credit creation in the economy. iv) TheBank of Ghanaâs Monetary Policy Committee (MPC) has reduced thePolicy rate cumulatively by 300 basis points since the beginning ofthe year. Explain briefly the impact the reduction in the policyrate will have on the economy of Ghana. Question 4 a) The followingextracts were taken from the Bank of Ghana websites as at 23rd June2018: 91-Day Treasury Bill Rate-13.3251% Interbank Rate-16.23%Monetary Policy Rate-17% Using the above information and the newmodel, calculate the Ghana Reference Rate as at 23rd June 2018. Thecurrent Cash Reserve Requirement (CRR) is 10% and the industryagreed Cash in Vault (CIV) limit is 2%. b) The following extractswere taken from the balance sheet for the month ended 31st March2018 for Bank XYZ which has been operating in Ghana for the past 20years. Products Balances (GHS m) Customer Rate Personal Loans(Floating) 350 GRR + 5% Corporate Loans (Floating) 565 GRR+4% Timedeposits(1yr maturity) 300 GRR-3% Savings 500 GRR-10% In additionthe following data is available: 91-day Treasury bill rate isforecasted to reduce by 200bps over the next 1 year, whilst theMonetary Policy and the Interbank Overnight Rates are forecasted todecline by 300bps and 250bps respectively. i) State the variousinterest rates on the bankâs products. What is the Bankâs NetInterest margin? ii) Suppose the forecasted interest rates aretrue, calculate the impact on the bankâs net interest margin in thenext 1 year. iii) Repeat (ii) assuming the bank is able to pass ononly 50% and 75% of the rate change to its liability and assetscustomers respectively. iv) The bankâs internal funds transferpricing to the Corporate Banking unit is 18.5%. At a managementmeeting held recently, the Corporate Director was not happy withthe internal funding rate as he claims it is making pricingunprofitable. Do you agree with his complain? Explain youranswer.
a) What is Asset Liability Management? Enumerate the roles andresponsibilities of the various governance structures available toa bank with regard to its interest rate risk management. b) What isInterest Rate Risk? Mention and explain the various sources ofinterest rate risk in a typical banking book. c) A bank has thefollowing balance sheet extract as at 31st March 2018. Using thetable above, i) Calculate 1-year; (a) Rate Sensitive assets (RSAs)(b) Rate Sensitive Liabilities (RSLs) (c) 1-year re-pricing Gap ofthe bank ii) What is the gap ratio of the bank? iii) What is theimpact of 2% increase in interest rate on the bankâs net interestincome over 1-year period? iv) Suppose interest rate increase by2.5% on assets and 2% on liabilities over the next 1-year.Calculate the cumulative impact on the 1-year Net Interest Incomeof the bank. Question 2 The Treasurer of Esabelle Company Ltd hasforecasted that the company will have excess cash in the next 12months and is therefore looking for a place to invest. As atreasury consultant advise the treasurer with regard to thefollowing: a) The things to consider before investing b) Theavailable Investment products on the Ghanaian financial market c)The various investment strategies he can adopt and considerationsthat should be made before adopting such strategies. Question 3 a)Explain what is meant by Bank Credit Creation and Cash ReserveRequirement b) Ansaba Bank Ltd received GHS 1m deposit from one ofits trusted customers who had hidden the cash under his pillowsince 1st July 2007 on 15 November 2017. The bank is required bylaw to keep 10 % of all its customer deposit with the Central Bankin a non-interest bearing current account. i) Calculate the maximumloan Ansaba Bank can grant with this loan if the bank does not keepany excess reserve ii) Suppose the number of banks in the economyis 5, how much loans can be created? What if the number of banks inthe economy is infinite? iii) Explain two mechanisms the centralbank can use to influence credit creation in the economy. iv) TheBank of Ghanaâs Monetary Policy Committee (MPC) has reduced thePolicy rate cumulatively by 300 basis points since the beginning ofthe year. Explain briefly the impact the reduction in the policyrate will have on the economy of Ghana. Question 4 a) The followingextracts were taken from the Bank of Ghana websites as at 23rd June2018: 91-Day Treasury Bill Rate-13.3251% Interbank Rate-16.23%Monetary Policy Rate-17% Using the above information and the newmodel, calculate the Ghana Reference Rate as at 23rd June 2018. Thecurrent Cash Reserve Requirement (CRR) is 10% and the industryagreed Cash in Vault (CIV) limit is 2%. b) The following extractswere taken from the balance sheet for the month ended 31st March2018 for Bank XYZ which has been operating in Ghana for the past 20years. Products Balances (GHS m) Customer Rate Personal Loans(Floating) 350 GRR + 5% Corporate Loans (Floating) 565 GRR+4% Timedeposits(1yr maturity) 300 GRR-3% Savings 500 GRR-10% In additionthe following data is available: 91-day Treasury bill rate isforecasted to reduce by 200bps over the next 1 year, whilst theMonetary Policy and the Interbank Overnight Rates are forecasted todecline by 300bps and 250bps respectively. i) State the variousinterest rates on the bankâs products. What is the Bankâs NetInterest margin? ii) Suppose the forecasted interest rates aretrue, calculate the impact on the bankâs net interest margin in thenext 1 year. iii) Repeat (ii) assuming the bank is able to pass ononly 50% and 75% of the rate change to its liability and assetscustomers respectively. iv) The bankâs internal funds transferpricing to the Corporate Banking unit is 18.5%. At a managementmeeting held recently, the Corporate Director was not happy withthe internal funding rate as he claims it is making pricingunprofitable. Do you agree with his complain? Explain your answer.a) What is Asset Liability Management? Enumerate the roles andresponsibilities of the various governance structures available toa bank with regard to its interest rate risk management. b) What isInterest Rate Risk? Mention and explain the various sources ofinterest rate risk in a typical banking book. c) A bank has thefollowing balance sheet extract as at 31st March 2018. Using thetable above, i) Calculate 1-year; (a) Rate Sensitive assets (RSAs)(b) Rate Sensitive Liabilities (RSLs) (c) 1-year re-pricing Gap ofthe bank ii) What is the gap ratio of the bank? iii) What is theimpact of 2% increase in interest rate on the bankâs net interestincome over 1-year period? iv) Suppose interest rate increase by2.5% on assets and 2% on liabilities over the next 1-year.Calculate the cumulative impact on the 1-year Net Interest Incomeof the bank. Question 2 The Treasurer of Esabelle Company Ltd hasforecasted that the company will have excess cash in the next 12months and is therefore looking for a place to invest. As atreasury consultant advise the treasurer with regard to thefollowing: a) The things to consider before investing b) Theavailable Investment products on the Ghanaian financial market c)The various investment strategies he can adopt and considerationsthat should be made before adopting such strategies. Question 3 a)Explain what is meant by Bank Credit Creation and Cash ReserveRequirement b) Ansaba Bank Ltd received GHS 1m deposit from one ofits trusted customers who had hidden the cash under his pillowsince 1st July 2007 on 15 November 2017. The bank is required bylaw to keep 10 % of all its customer deposit with the Central Bankin a non-interest bearing current account. i) Calculate the maximumloan Ansaba Bank can grant with this loan if the bank does not keepany excess reserve ii) Suppose the number of banks in the economyis 5, how much loans can be created? What if the number of banks inthe economy is infinite? iii) Explain two mechanisms the centralbank can use to influence credit creation in the economy. iv) TheBank of Ghanaâs Monetary Policy Committee (MPC) has reduced thePolicy rate cumulatively by 300 basis points since the beginning ofthe year. Explain briefly the impact the reduction in the policyrate will have on the economy of Ghana. Question 4 a) The followingextracts were taken from the Bank of Ghana websites as at 23rd June2018: 91-Day Treasury Bill Rate-13.3251% Interbank Rate-16.23%Monetary Policy Rate-17% Using the above information and the newmodel, calculate the Ghana Reference Rate as at 23rd June 2018. Thecurrent Cash Reserve Requirement (CRR) is 10% and the industryagreed Cash in Vault (CIV) limit is 2%. b) The following extractswere taken from the balance sheet for the month ended 31st March2018 for Bank XYZ which has been operating in Ghana for the past 20years. Products Balances (GHS m) Customer Rate Personal Loans(Floating) 350 GRR + 5% Corporate Loans (Floating) 565 GRR+4% Timedeposits(1yr maturity) 300 GRR-3% Savings 500 GRR-10% In additionthe following data is available: 91-day Treasury bill rate isforecasted to reduce by 200bps over the next 1 year, whilst theMonetary Policy and the Interbank Overnight Rates are forecasted todecline by 300bps and 250bps respectively. i) State the variousinterest rates on the bankâs products. What is the Bankâs NetInterest margin? ii) Suppose the forecasted interest rates aretrue, calculate the impact on the bankâs net interest margin in thenext 1 year. iii) Repeat (ii) assuming the bank is able to pass ononly 50% and 75% of the rate change to its liability and assetscustomers respectively. iv) The bankâs internal funds transferpricing to the Corporate Banking unit is 18.5%. At a managementmeeting held recently, the Corporate Director was not happy withthe internal funding rate as he claims it is making pricingunprofitable. Do you agree with his complain? Explain youranswer.
