a) HSBC announced stop paying final dividend in 2020 and dividends for the first three quarters in 2021 in response to the order made by the UK regulator. Explain the rationale of the regulator. (3 marks)

b) Explain how the refinancing risk faced by financial institutions can lead to insolvency risk. (3 marks)

c) Explain how credit risk is related to liquidity risk. (4 marks)

d) Explain the tradeoff between foreclosure and power of sale adopted by financial institutions if the borrowers default their mortgage payment. (4 marks)

(e) Explain the tradeoff between lending loans to small corporations and large corporations by commercial banks. (4 marks)

(f) Identify and explain THREE measures adopted by commercial banks to mitigate credit risks of lending to large corporations. (6 marks)