Question

YesBank has the following items on its balance sheet 1. 150 75 100 250 100 50 25 25 45 loans to corporations loans to households YesBank's holdings of shares and bonds, etc retail current account deposits (deposits by general public with YesBank) commercial current account deposits (deposits by companies with YesBank) tangible assets and property cash in vaults reserve deposits with Bank of England (deposits by YesBank) borrowing by YesBan k in money market a) Construct a balance sheet for YesBank with each of the above items included. b) Calculate YesBank's net worth and show where it appears on the balance sheet c) Which of YesBank balance sheet items should be included in a standard definition of "banlk money"? d) YesBank makes a personal loan of E5,000 to Mr A, and credits his current account with the amount of the loan. Describe the initial impact on YesBank's balance sheet, the money supply, and the net worth of both YesBank and Mr A. e) Mr A then withdraws £5,000 in cash with which he pays Ms B for building work. She immediately deposits it in her current account with another bank, NoBank. What is the impact on YesBank's balance sheet, and on the aggregate money supply? Financial media report that YesBank has made "significant" capital losses on some of its financial investments, as well as suffering high default rates on its loans to households. Discuss the possible consequences, using the information in your answer to question 1. 2.

I am not sure how to answer question 1d and e as well as question 2

Answer 1

1 al Impact on Yes Bank's balance sheet Add S 5000 in loan to households Less S 5000 in retail current account deposits (In the name of Mr A) 2 The money supply (No impact on money supply as the eligibility of loan has been availed) 3 Net worth of YesBank and Mr A Yes bank-No change in Net worth Mr A- No change in Net worth, as he has not withdrawn the amount 1 Impact of Yes Bank's balance sheet if Mr A withdrwas $ 5000 Less $ 5000 in from Cash in Vault The money supply Money supply in the market increased by S 5000 2 Provisions would be required to created to for loans expected to be defaulted This would be impact the profitability of the banks