Question

18. WallsFarther Bank has the following balance sheet (in millions of dollars). Liabilities and Equity Assets $ 12 Stable retail deposits $ 55 Cash 19 Less stable retail deposits Deposits at the Fed 20 Treasury securities 125 Unsecured wholesale funding from: Stable small business deposits GNMA securities 94 80 Loans to AA rated corporations Less stable small business deposits 138 49 Nonfinancial corporates Loans to BB rated corporations 106 250 20 Equity Premises 60 Total $514 Total $514 Cash inflows over the next 30 days from the bank's performing assets are $5.5 million. Calculate the LCR for WallsFarther Bank.

Answer 1

F G H I J K 013 - f A B C D E 1 Solution : 2 Level 1 Assets = 12 + 19 + 125 = $156 3 Level 2A Assets = (94 +138) * 0.85 = $197.20 4 Level 2B Assets = 106 * 0.85 = $90.10 5 6 Level 1 Capped at 40% of highly liquid assets 7 Now Stock of highly liquid Assets = $104 + $156 8 40% Cap of Level 2 Assets Already met 9 156*(1/(1-0.40) - 1] 104.0 260 Total 364.0 10 364*(1-0.40) $218.40 1.65 11 Now after cap of 40% Stock of high Quality liquid assets = 12 13 Cash Outflows:- Amount 14 Stable Retail Deposits 15 Less Stable Retail Deposits 16 Stable Small Business Deposits 17 Less Stable Small Business Deposits 18 Non Financial Corporates 19 Total Cashflows over next 30 days Total Cashflows over next 30 days Run-off Factor 3% 10% 5% 10% 75% 4.9 187.5 200.05 5.5 Total Net Cash outflows Over next 30 Days 194.55) 24 LCR (Liquidity Coverage Ratio) = $218.4m / $194.55m 112.29% a