Principles of Banking
A bank has the following information.
Its rate-sensitive assets equal £900 million.
Its rate-sensitive liabilities equals £700 million.
Assume a parallel shift in the yield curve.
Present the relevant formulas and calculate:
The bank’s GAP.
The expected change in net interest income if rates increase by 1 percentage point?
The expected change in net interest income if rates decrease by 2 percentage point?
Assume that this bank has a negative duration GAP. Explain the implications of duration GAP in this case and provide some possible transactions/strategies (at least two) to reduce interest rate risk.Present and discuss the five Cs of credit in relation to the important questions that loan officers should ask when analysing loan applications.
Critically discuss the different tools that banks can use to reduce credit risk.
Word limit: 800.
QUESTION 2.
Discuss the advantages and disadvantages of the public (vs. private) ownership in central banks. Give a historical example for each type of ownership .
Word limit: 500.
Explain and give a real-life example for each type of bank resolution policy (bail-outs, etc.) that can be undertaken by the governments around the world by referencing a [credible] online news source and including the related weblink in your references at
Word limit: 800.