Question

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" ...He said the banking system could lose deposits in several ways. 'One channel in recent quarters has been domestic fund managers allocating away from cash and deposits to other asset classes – particularly overseas assets,' Mr Jolly said." Source: Banks face cash squeeze as fund managers, households draw deposits (AFR, 15.07.2018) This quote contains some misleading statements. The following questions will help you to get a deeper understanding. These tasks are also exam relevant. Assets ESF OZ Bank AUD 150m Deposits Liabilities and equity AUD 810m Loans AUD 850m Deposits Fund Manager AUD 100m Household AUD 50m Equity AUD 40m Assets Deposits at OZ Bank Fund Manager AUD 100m Liabilities and equity AUD 100m Equity

Answer 1

Part A

                                         OZ Bank

ASSETS                                                 LIABILTIES & EQUITY

ESF                         AUD 150M                    Deposit                         AUD 810M

Loans                       AUD 850M                   Household                     AUD 50M

                                                                       Equity                           AUD 40M

                                       

                                      FUND MANAGER

ASSETS                                                               LIABILTIES & EQUITY

Bonds                      AUD 100M                         Equity                    AUD 100M

                                     

                                              BANK B

ASSETS                                                                 LIABILTIES & EQUITY   

ESF                        AUD 100M                           Deposits               AUD 700M

Loans AUD 900M    Deposit Mr.RED AUD 100M

Equity                 AUD 200M                

Loans to deposit ratio for bank B remains unchanged. for bank Oz

Earlier =Loans/ Deposit = (850/910)*100= 93.41%

Now =Loans/ Deposit =(850/810)*100= 104.94%

PART B

                                            BANK B

ASSETS                                                                 LIABILTIES & EQUITY   

ESF                        AUD 100M                           Deposits               AUD 700M

Loans AUD 800M                 Equity                 AUD 200M       

Loans to deposit ratio changes.

earlier =Loans/ Deposit =(900/800)*100= 112.50%

Now =Loans/ Deposit =(800/700)*100= 114.29%

PART C

                                         OZ Bank

ASSETS                                                 LIABILTIES & EQUITY

ESF                         AUD 150M                    Deposit                         AUD 860M

Loans                       AUD 850M                   Household                     AUD 50M

BONDS                   AUD 50M                    Equity                           AUD 40M