Posted below

Question 1   (20 marks - Maximum 350 words)

Look at the balance sheet provided below and:

a) Identify the bank’s ‘reserves’ and deposits and calculate reserves as a ratio to deposits.

b) What is the value of the bank’s ‘equity’? Express it as a fraction of total assets.

c) Suppose that the value of ‘money market loans’ falls by 10 per cent. What else in the balance sheet must change?

d) Looking at the bank’s assets, which do you think are the most risky? Why?

National Provincial Bank, consolidated balance sheet, £mn

Question 2   (80 marks - Maximum 1,650 words)

Explain the main risks to which banking activity is subject, and outline the steps which banks can take to minimise these risks.

The word limit does not include graphs and bibliography.