1. Design a basic bank balance sheet with the key components of Assets, Liabilities, Capital and Off-Balance Sheet items that we discussed in class. Put some simple numbers resembling a sample bank.

Trace the following risk on your balance sheet:

Liquidity Risk

Credit Risk

Interest Rate Risk

FX Risk (to do this analysis, show on your balance sheet some FCY assets

and liabilities as well)

For EACH risk:

a) Name the balance sheet item(s) the specific risk is mainly related to..

b) Determine at least two possible negative things that can happen related to this risk and show how the balance sheet is impacted when these happen show the changes in numbers.

c) Explain how as the manager of your bank you can minimize the risk.

d) What controls do the regulatory authorities impose on you to help you

control this risk.