Analysis of Commercial Bank Balance Sheet Free Essays

CONTENTS INTRODUCTION DEFINITION_ OF COMMERCIAL BANK_ *â€Å"Banks and other deposit taking institutions are financial intermediaries whose assets consist overwhelmingly of loans to a wide variety of borrowers and whose liabilities consist overwhelmingly of deposits. † THE ECONOMICS OF MONEY BANKING AND FINANCE 3rd* Edition PETER HOWELLS KEITH BAIN Pg 32 A sound system of banking is very important for any economy. Commercial banks are directly related to the payment system of the economy. We will write a custom essay sample on Analysis of Commercial Bank Balance Sheet or any similar topic only for you Order Now Generally most commercial banks are controlled by the central bank of that particular country. The central bank can never allow the banking system to fail because if banks start to fail the payment system will fail. They may allow some banks to fail but the government will never allow big banks or the whole payment system to collapse. This is very evident from the recent where government have pumped in huge amount of money to save the so called â€Å"too big to fail† banks. Banks helps in the payment services through various kinds of deposits, debit cards and credit cards ANALYSIS OF COMMERCIAL BANK BALANCE SHEET For my assignment I have picked up Lloyds TSB as my bank. Lloyds TSB is one of the four biggest bank in the UK. I have taken 2007 annual report as the group has published only the 2008 interim report. The second item which we see in Lloyds TSB balance sheet is loan and advances to banks. It reflects the interbank relationship. This figure has fallen for most of the commercial bank and also for Lloyds TSB there is an decrease of 16. 50%. This is due to the financial crisis which has hit banking sector very badly and many banks have failed as a result. Llyods TSB gives loans to customer just like any other commercial bank and bank charge an interest for giving loans which is higher than the interest on deposit. But there is always a default risk attached with the loan which the bank gives. Commercial Banks gives different kinds of loans starting from mortgage, education loan, overdraft facility etc. In case of Lloyds TSB mortgage comes out to be 48. 4% of loans to customer. And thing we should bear in mind is that mortgage are long term loan and it can be for 30 years as well. Customer Accounts got an increase of 11% and there is an increase of 11% from 2006 to 2007. LIABILITIES OF LLOYDS TSB Lloyds TSB is also having some fixed deposit like Certificates of deposit. In these deposits customers cannot withdraw there money before a specified time and they also receive some interest as well. Second are the commercial papers which are unsecured promissory notes to meet short term obligations. Certificate of Deposit comes to around 14,995 million GBP and commercial paper is 17,388 million GBP for Lloyds TSB. Lloyds TSB is also having reserves after paying reserves. This reserve can be used in case of emergency or any unexpected risks The main risks that commercial banks face due to their exposure to different kinds of assets and liabilities are liquidity risks, market risk and credit risk. Lloyds TSB faces liquidity risk because of deposit in central bank. They have a deposit of 4330 million GBP. This means that they cannot give this amount as loans because it’s stuck with the central bank. This amount has increased considerably from 2006 to 2007. The bank faces liquidity risk because of their mismatch in assets and liabilities side. The group liquidity risk exposure is 33,185 million GBP. The main sources of liquidity risk for the bank are deposits from banks and customer accounts. As we seen above the assets of Lloyds TSB are long term whereas the liabilities are short term. The commercial bank is the main source of payment service in any economy. Whenever bank gives loan they are exposed to default risk. Default risk arises whenever a company or individual is unable to meets its obligation on interest or principle payment of the loan. The bank faces asymmetric information problem as well. Though the bank does proper due diligence before giving out any loans but asymmetric information problem cannot be ruled out with any banks at all. Due to asymmetric information we have adverse selection and moral hazard problem. Adverse selection problem comes to picture before entering into the transaction. In short the bank has to filter the good borrowers and the bad borrowers. Sometimes the bank may give loan to the bad borrowers and may suffer of this. Though banks have put checks like credit history before making out the loan but adverse selection problem cannot be neglected completely. The other problem which is created because of asymmetric information is moral hazard problem. The moral hazard problem starts after the bank has sanctioned the loan. Borrowers may get into undesirable activities. The main objective for which the loan was sanctioned may never get fulfilled. The other side of moral hazard problem is the conflict of interest between the borrower and the bank. Borrowers may try to act on their interest rather than the interest of the bank. Banks like Lloyds TSB can overcome the problems of adverse selection and moral hazards if they have proper check and control on their customers but rarely any bank achieves 100% success in these problems. These are two most important risks which any financial intermediary faces in order to serve their most important duty i. e. ayment services to the economy. Just like any other financial institution the group also faces credit risk. {text:bookmark-start} â€Å"Credit risk {text:bookmark-end} is risk due to uncertainty in a counterparty’s (also called an {text:bookmark-start} obligor {text:bookmark-end} ‘s or {text:bookmark-start} credit’s {text:bookmark-end} ) ability to meet its obligations. Because there are many types of counterparties—from individuals to sovereign governments—and many different types of obligations—from auto loans to derivatives transactions—credit risk takes many forms. † (www. riskglossary. om). After the group’s acquisition of Halifax of Scotland, the credit rating of the bank has come down. In order to counter credit risk credit rating plays a very important role. The group exposure to credit risk is 356,860 million GBP. PART 2 Asset Liability Management â€Å"The ALM group within a bank has been concerned with control of interest rate risk on the balance sheet. For some bank it may be equally important to manage interest rate risk arising from off balance sheet, but it is instructive to look at the traditional methods and progress to the relatively new procedures. (HEFFERNAN, SHELAGH A. 2005) Moreover banks have mismatch in maturity of their asset and liability. Banks use asset liability management to manage interest rate risk, market risk and credit risk. Let’s take an example where all deposits are on fixed rate of interest but all loans are made on floating rate of interest. Commercial banks mainly use three types of markets to cover these risks. These are money market, capital market and derivative market. Capital Market is generally used by large companies or governments to raise funds for the long period. Capital market can be of two types like primary market, securities are traded for the first time and secondary market, and in this securities are traded after they are traded in the primary market. Another subdivision of capital market is bond market and stock market. There are various stock market around the world like London Stock Exchange, whereas bond market includes different kinds of bonds like government bonds (US Treasury bills), foreign bonds etc. One of the most important changes in this market is the development of asset backed securities. text:bookmark-start} â€Å"Securitization {text:bookmark-end} is a financial transaction in which assets are pooled and securities representing interests in the pool are issued†. (http://www. riskglossary. com/) When securitization is backed by any assets such as student loan, mortgages this becomes asset backed security. Lloyds TSB also securitizes its assets in order to overcome its liquidity problem. The process of securitizati on has become quite complex with the introduction of Collateralized Debt Obligation, Collateralized Loan Obligation etc. And these complex securities are the heart of the financial crisis. Lloyds TSB is not having much exposure to these complex securities. Banks get into off balance sheet activities to get more profit. It helps the bank to get fee income. One more advantage of off balance sheet activity is that it does not appear into the balance sheet of the bank. The derivative market is also used by the bank to hedge their risks. â€Å"By their nature, derivatives instruments can be used for hedging different types of risks. Owing to this, banks and insurance companies use derivatives in the management of their Asset Liability Management† (Cornelius Nandyal, 2001). The derivative market is going through lot of new changes. Regulators are trying to put lot of new regulations in order to bring transparency. Banks use interest rate swaps, credit default swaps, total return swap, credit linked notes etc. But different people have different views on derivatives. According to Warren Buffet derivatives are weapon of mass destruction and can act as time bombs in the future. Whereas Alan Greenspan says â€Å"Derivatives have permitted the unbundling of financial risks. Because risks can be unbundled, individual financial instruments now can be analyzed in terms of their common underlying risk factors, and risks can be managed on a portfolio basis†. Banks have also used money market for asset liability management. The most important organ of the money market is the interbank market. In interbank market banks with surplus lend to bank with deficit. This market is severely hit by the recent financial crisis. Banks don’t know about the financial soundness of the bank to which they are lending. This has increased the liquidity problem of the bank. Other types of market are the gilt repo, commercial paper market and the certificate of deposit market. As we have seen above Lloyds TSB invest in commercial paper and certificate of deposit. Securitization and the Global Financial Crisis DIAGRAMATIC EXPLANATION OF SECURITIZATION: {draw:frame} Source: http://www. usbancortrusteeservices. com/images/ygpa7_chart_offering_structure_ptnm. pg The recent crisis started because of the sub prime mortgage loans that originated in the USA. But these loans were repackaged and sold all round the world, so this crisis which began in USA became a worldwide crisis. Securitization gives banks lot more leverage. The seeds of the recent crisis were sown in when the Federal Reserve made interest rates around 1% and the economy was pumped with lot of cash. Banks started giving these loans as mortgage to the s ub prime customers, without any credit check and at very easy terms and condition. Once interest rate started to increase in 2004, borrowers started to default on their loans. With the increase of interest rates house prices started to come down. Credit rating agencies who gave these securities AAA rating made these securities junk. The assumption on which these rating agencies were working was that house prices will keep raisingin the future as well. â€Å"The combination of low capital requirements imposed on AAA-rated assets and a commonly held perception that they were â€Å"safe,† allowed banks to hold on to any senior tranches that were not sold to investors. But when the structured finance market collapsed in late 2007, the investment banks found themselves holding hundreds of billions of dollars of low-quality asset pools, many of which consisted of leveraged buy-outs loans, subprime mortgages, and bonds from CDO’s in process-that is, where the tranches had not yet been sold to other investors. † (Coval et al, 2008) No one knows the worth of these complex securities which the banks are holding. Banks have stopped lending to each other because no one is sure of how much the other bank is holding. So interbank market is almost closed. How to cite Analysis of Commercial Bank Balance Sheet, Papers

The BFG free essay sample

I wanted to be short when I was younger. No, seriously. I wanted to be the 4’6†, missing-growth-spurt 7th grader who walked down the middle school halls in her size 3 Converse, maybe wearing jeans from the Macy’s kids section. It had always been a dream of mine, I even asked Santa Claus to stop me from growing one year. Now don’t get me wrong, Younger Me knew being tall was cool. I was the designated projector-starter, ceiling fan initiator, and box-carrier of the classroom. I could always be seen regardless of where I was standing and called on first when my hand was two feet above everybody else’s during science class. I could reach all the way across the table for scissors and could kick that pencil that rolled off your desk even if it was in the next aisle. You could say I was talented. It got even more exciting outside of school: I was the only one that could hit the sign hanging from the mall ceiling and was in charge of buying my friends’ PG-13 movie tickets. We will write a custom essay sample on The BFG or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page One time in 7th grade someone asked if I was in high school, could you believe it? But as people’s growth spurts began to wind down, and the annual shopping trips were bringing home fewer and fewer clothes, I was still growing. Eventually high school started and I was 5’10†, while my closest friends were far below me in the 5-foot lands. This is when being tall wasn’t too much fun anymore, and the only thing that grew short was my patience. I was still taping posters without using a chair and grabbing boxes off the top shelf, but now my height was an object of criticism. â€Å"Too tall, get in the back.† â€Å"Heels really aren’t the best choice for you tonight.† â€Å"Tall girls like you should be playing basketball or volleyball, not dancing.† That is when I learned that being tall wasn’t exactly a remarkable aspect of my personality anymore. I slipped into a state of shrinking into myself whenever a projector screen needed to be pulled down or hiding in the back of the group during PE because – even though I was tall – I wasn’t really that good at basketball. I dreaded the regular general admission concert in New York City, as all I could expect was the all-too-familiar shoulder tap. I was intimidatingly lanky, and people strayed from such a drastic height difference, never considering that maybe I wasn’t the standoffish giant they expected me to be. Everything went from â€Å"Perks of Being a Tall Person† to â€Å"Cons of Being Labeled.† I was the tall kid, certainly not the ambitious kid; I was the quiet kid, not ever the witty kid. I was classified and put aside because of something out of my control and left completely up to genetics. But being tall was so much more th an the absence of a step stool. I was that tall girl you knew in high school, the one with the slightly intimidating height you were always hesitant to talk to. Turns out I wasn’t really that intimidating. In reality I would go out after school to babysit little kids. I’d entertain for hours and hours with the soul of a child, and squeeze into pillow forts meant for 3-year-olds. I may have come off passive or even yielding, but I was just using the same patience as when I taught those after-school preschool dance classes. I was probably completely different than the small personality the school had conditioned me to have, but trust me – I had a personality bigger than the BFG’s. While Younger Me slouched in class and wished vainly that reverse-growing was a possibility, I see the truth in what my height really is: a part of my identity.

3 Sentences with Parenthetical-Phrase Punctuation Problems

3 Sentences with Parenthetical-Phrase Punctuation Problems 3 Sentences with Parenthetical-Phrase Punctuation Problems 3 Sentences with Parenthetical-Phrase Punctuation Problems By Mark Nichol In each of the sentences below, faulty punctuation confuses the syntactical organization. Discussions and revisions follow each problematic sentence. 1. Documentation, such as white papers, that support model choices, data analysis and other similar assertions, will be necessary to support the elections made. This sentence includes one parenthetical phrase (â€Å"such as white papers†), but it’s punctuated as if another, longer one is embedded after it. However, the segment of the sentence between that phrase and â€Å"will be necessary . . .† is not parenthetical, so no comma is necessary before will: â€Å"Documentation, such as white papers, that support model choices, data analysis and other similar assertions will be necessary to support the elections made.† 2. Presumptive Democratic presidential nominee, Hillary Clinton, faces consistent fire from people who oppose her policy positions, including Republican nominee, Donald Trump, and many others. There’s a subtle distinction between an appositive (a word or phrase equivalent in meaning with an adjacent word or phrase) and a simple description. The phrases preceding the names in this sentence are descriptions; simply precede each with the and they become appositives, which are set off parenthetically. But as written, this sentence requires only one comma- the one separating the subordinate clause (beginning with â€Å"as does† from the main clause): â€Å"Presumptive Democratic presidential nominee Hillary Clinton faces consistent fire from people who oppose her policy positions, including Republican nominee Donald Trump and many others.† 3. Raucous protesters and supporters of Donald Trump violently confronted each other in California leading to twenty arrests as the Republican presidential contender brought his campaign to conservative Orange County. The subordinate clause in this sentence, beginning with â€Å"as the Republican presidential contender,† must be set off by a comma, but an additional comma is required before the parenthetical phrase â€Å"leading to twenty arrests.† The second comma does double duty closing off the parenthetical phrase and setting off the subordinate clause from the main clause: â€Å"Raucous protesters and supporters of Donald Trump violently confronted each other in California, leading to twenty arrests, as the Republican presidential contender brought his campaign to conservative Orange County.† (The second comma is required because the arrests occurred after, not concurrent with, Trump’s arrival.) Want to improve your English in five minutes a day? Get a subscription and start receiving our writing tips and exercises daily! Keep learning! Browse the Punctuation category, check our popular posts, or choose a related post below:25 Subordinating Conjunctions10 Techniques for More Precise Writing40 Words Beginning with "Para-"

Political Party Ads - Who Pays for Them

Political Party Ads - Who Pays for Them Finding out who pays for political party ads in election season can be tricky. Candidates and committees who purchase political party ads on television and in print are required to disclose their identities. But often times those committees have vague names such as Americans for Prosperity or Americans for a Better Future. Understanding who contributes money to those committees so they can buy political ads is an important function of democracy because the ads play such a large role in elections. Are they conservative or liberal in political philosophy? Do they have a special interest or issue they are trying to influence? It is sometimes difficult to discern what a committees motives are just by watching or reading political ads. Who Pays for Political Party Ads Generally speaking, there are several types of groups that pay for political advertising. They are individual candidate election campaigns such as those for President Barack Obama or 2012 Republican presidential nominee Mitt Romney; political parties such as the Democratic National Committee and Republican National Committee; and political action committees or super PACs funded by industries and special interests. Some of the largest special interests in American politics are abortion and gun-control opponents, energy companies and senior citizens. In recent years, though, super PACs have emerged has powerhouses in the electoral process. So have 527 groups and other organizations who seek to exploit weak disclosure laws and spend so-called dark money. How to Tell Who Pays for Political Ads It is easy to tell when an individual political candidate or political party buys airtime for ads. They will disclose their identities, often at the end of the ad. Typically, the wording is This ad was paid for by the committee to re-elect Barack Obama or I am Mitt Romney and I approved this message. Political action committees and super PACs are required to do the same, but they are not required to provide a list of major contributors or identify their special interests on the air. Such information is available only through the committees own websites or through Federal Election Commission records. Those records, called campaign finance reports, include details about how much a political candidate or political party is spending on political ads. Disclosure Controversy Political action committees and super PACs are required by law to list their contributors in disclosures filed regularly in Washington, D.C. Such information can shed light on whether those super PACs are conservative or liberal in nature. But some super PACs exploit a loophole in reporting laws not addressed in the legal case that led to their creation, Citizens United v. the FEC. Super PACs are permitted to accept contributions from nonprofit groups classified as 501[c][4] or social welfare organizations under the Internal Revenue Service tax code. The problem is that under that tax code, 501[c][4] groups are not required to disclose their own contributors. That means they can make contributions to super PACs in the name of the social welfare entity without having to disclose where they themselves got the money. Attempts to close that loophole in Congress have failed. Greater Transparency The Federal Communications Commission requires television stations that get paid to broadcast political ads to keep a record of who bought airtime. Those records are required to be made available for inspection to the public at the stations. The contracts show the which candidates, political committees or special interests are buying political ads, the length and target audience, how much they paid, and when the ads aired. Beginning in August 2012, the FCC also required television stations to post online all contracts with candidates, super PACs and other committees buying airtime for political ads. Those contracts are available at https://stations.fcc.gov.

The Aims of the Arts and Crafts Movement Essay Example | Topics and Well Written Essays - 2250 words

The Aims of the Arts and Crafts Movement - Essay Example Because of the name and the overall focus of the movement, it might at first be imagined that this artistic vision could only barely touch the architectural styles of the day; however, the Arts and Crafts movement had a profound effect upon the architecture of the latter 1800s. One of its primary aims was to â€Å"render all branches of art the sphere no longer of the tradesman but of the artist. It would restore building, decoration, glass painting, pottery, woodcarving and metal to their right place beside painting and sculpture.† Working within the rather loose boundaries of the Arts and Crafts, Voysey, Baillie Scott and their contemporaries began developing new means of approaching design that hadn’t been considered previously, generating three results that almost immediately impacted the architecture of the time. â€Å"First, and the most obvious, the Arts and Crafts emphasized the artistic potential of everyday objects. Second, vastly higher standards of craftsma nship were applied to these objects, and the ideal of craftsmanship was realized much more widely than had been possible before. †¦ Third, new stress was given to the importance of function in the creation of forms.† Morris’ ideas in promoting this movement included an architectural independence from imposed style in favour of a naturally growing concept. This natural concept emerged from consideration of the surroundings and the needs of the average person. The idea was to keep the form simple and to incorporate and preserve .

Art History, Renaissance through Modern Essay Example | Topics and Well Written Essays - 2000 words

Art History, Renaissance through Modern - Essay Example Renaissance was a reaction to the Middle Ages and serve as the foundation for the subsequent Baroque period in Europe. Its etymological meaning is "rebirth" of classical antiquity, pertaining to the revival of arts and sciences after it was diminished because of the emphasis on religion. However, it should be noted the majority of the art work where commissioned either for the Church or by supporters of it (Gombrich, 1995). The period also marked the significance developments in artistic technique which included the development of linear perspective, spatial composition and definition of the proportions for human form. The most notable artist of the period includes Leonardo Da Vinci, Michelangelo, Raphael as well as Boticelli who while was briefly eclipsed by the first three artists rose to contemporary regard. However, the Da Vinci, Michelangelo and Raphael have been more specifically associated as High Renaissance artists or for the latter Renaissance arts (Stokstad, 2004). One of the Botticelli's portraits, early example, if not more pure examples, of the renaissance style is featured in Figure 1. From the example, the subject, a woman of elite standing, dominates the frame. The figure is limited to the upper half or bust of subject, emphasizing the identity of the individual rather than her form. It is likely that Botticelli positioned the subject in such a way to facilitate the effect of the light coming from what appears to be a window in the background of the painting. The impression derived is that the work was done via formal sitting in studio or small space. In comparison to the other portraits in this paper (see figure 2 and 3), the positioning of the subject provides little detail for the rest of the painting's composition. The dark background with only a hint of a window as detail provides a direct contrast with the subject's red-sleeved dress. The background provides little detail or insight regarding the personality of the subject and essentially on serve to highlight the visual image of the subject. Technique The subject is defined finely from the background. In a similar manner, details on the subject itself are very definite, if not stark. The technique is reflective of the subscription to classical techniques that emphasize form and figure. There are no discernable brushstrokes and colors are mixed smoothly. Also, the portrait in itself is reminiscent of busts in relief since though there is more depth and application of lighting techniques, there little suggestion of movement or interaction with its space. Lighting techniques were used predominantly to create facial characteristics, emphasizing the forehead, nose and chin, again reflective of the classical influence. The features are associated with having strong character or persona and therefore may have been emphasized to communicate the social stature of the subject of the painting. The subject's complicated coiffure and quality of clothing also reinforce this idea. The light used is quiet harsh but not so much that the figure of the subject to seem like it is outdoors. Shadowing and graduations in hue on the body of the subject suggests that the light source has elevated and angled from the window in the back

Digital technology and Education Research Proposal

Digital technology and Education - Research Proposal Example At the same time, the institutions of higher education learning have been challenged to respond to the needs of globalization, as well as the knowledge economy in order to prepare the competencies and skills of the 21st century which require changes in teaching practices and curriculum. This has created demand for competence and more transparent performance and accountability in research and teaching. Nevertheless, some policy makers perceive digital technology as an effective tool that will help in managing most of the changes and will act as a transformative tool in both teaching and learning. The 20th century has witnessed massive globalization of education. For instance, the total high education enrolment worldwide stood at 100 million in 2000s. This was 200 times higher than the enrolment at the beginning of 20th century. The number is estimated to reach 125 million by 2020. This globalization is normally characterized by huge diversification of the student enrolment since even the student from low economic backgrounds can work as part time students. Internationally, there has been massive enrolment of students especially in UK, US, New Zealand, Canada and Australia. The students normally demand flexibility in teaching and learning processes. The traditional school leavers demand more flexibility in their formal education, hence the name â€Å"digital native† grown and matured with the digital technologies and are still surrounded and immersed in digital technologies in their daily activities. Therefore, the current research will investigate the effects of digit al technology on today’s business. Today’s students have not changed just incrementally from the traditional ones but have changed in slang and styles when compared to the previous generations. There has been a big discontinuity that has fundamentally changed things until it is absolutely impossible to go back. This discontinuity