Part 7 – Quiz Answers
1 . Exactly what are the objectives of lender performance examination? • evaluate progress towards meeting the goals and objectives placed by managing, and • compare a bank's efficiency relative to various other banks • highlight pros and cons • intended for management to adopt appropriate helpful action 2 . What are the key external forces that have an impact on a bank's overall performance? • Deregulation – removed competition on both sides in the balance sheet. • Innovation and Globalisation – expanded banks' balance bedding in the two domestic and foreign resources. Profits being a percentage of assets include declined in many instances as equilibrium sheets extended and competition put pressure on earnings.
3. What components perform regulators use to measure financial institutions? • Capital adequacy • Asset top quality • Administration quality • Earnings • Liquidity • Sensitivity to advertise risk four. Weaknesses of CAMELS? • It is a screening device pertaining to regulators to spot problem banking companies. • Not just a measure a measure of monetary performance in the sense of revenue. 5. What additional measures can regulators use? • Share price of traditional bank • CD ALBUMS spreads • Stress test
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6. Exactly what the types of economic performance steps? • Accounting measures – Net income – ROA – ROE – Market to book • Risk –adjusted performance steps – RAROC - Risk adjusted return on capital – RORAC - Go back - Returning on risk adjusted capital – Shareholder's value added – Eva -- Economic Worth add
six. What is the primary problem in employing Net Income being a measure of performance? • it does not adjust to get the size of the financial institution • makes it difficult to evaluate one traditional bank relative to another 8. Precisely what is the difference between ROE and ROA • ROE measure the profitability to shareholders • ROA measure the profitability generated by resources used. on the lookout for. What is the relationship between ROE & ROA?
10. What really does the Equity Multiplier measure? • Measures the bank's level of leverage – i. e. the level of borrowings relative...