1. Table 1 shows the consolidated balance sheet of Barclays PLC as at 31 December 2019. Use the table to answer (a) and (b) and show your workings clearly. Table 1: The consolidated balance sheet of Barclays PLC in 2019 Liabilities (million) Assets (million) Cash and reserve balances at the central bank 125,940 Deposits 213,881 Cash collateral and settlement balances 79,486 Cash collateral and settlement balances 67,682 Wholesale reverse repo lending and other secured lending 1,731 Wholesale repo borrowing secured with collateral other similar secured borrowing 2,032 Loans and advances at amortised 141,636 Unsecured borrowing 66,961 cost Fixed assets 1,631 Trading portfolio liabilities 35,212 Trading portfolio assets 113,337 Derivative financial instruments 228,940 Derivative financial instruments 229,641 Other liabilities 211,349 Other assets 183,270 Total assets 876,672 Total liabilities 826,057 Net worth Equity 50,615 (a) i. Calculate the bank's loan to deposit ratio and interpret your results. [5 marks] ii. If the bank's return on equity for its shareholders was nine percent in 2019, calculate the bank's return on assets in 2019 and interpret your results. [6 marks] (b) Explain the difference between a bank having a liquidity problem and a solvency problem. If Barclays PLC was to experience either of the two problems, explain how each would affect its balance sheet? [8 marks] (c) Following its collapse during the 2008 global financial crisis, Northern Rock's balance sheet revealed its reliance on funding in money markets. Explain Northern Rock's pitfall of relying on money market funding relative to customer deposits to meet its short-term liquidity to refinance its short-term loans. [11 marks] 1. Table 1 shows the consolidated balance sheet of Barclays PLC as at 31 December 2019. Use the table to answer (a) and (b) and show your workings clearly. Table 1: The consolidated balance sheet of Barclays PLC in 2019 Liabilities (million) Assets (million) Cash and reserve balances at the central bank 125,940 Deposits 213,881 Cash collateral and settlement balances 79,486 Cash collateral and settlement balances 67,682 Wholesale reverse repo lending and other secured lending 1,731 Wholesale repo borrowing secured with collateral other similar secured borrowing 2,032 Loans and advances at amortised 141,636 Unsecured borrowing 66,961 cost Fixed assets 1,631 Trading portfolio liabilities 35,212 Trading portfolio assets 113,337 Derivative financial instruments 228,940 Derivative financial instruments 229,641 Other liabilities 211,349 Other assets 183,270 Total assets 876,672 Total liabilities 826,057 Net worth Equity 50,615 (a) i. Calculate the bank's loan to deposit ratio and interpret your results. [5 marks] ii. If the bank's return on equity for its shareholders was nine percent in 2019, calculate the bank's return on assets in 2019 and interpret your results. [6 marks] (b) Explain the difference between a bank having a liquidity problem and a solvency problem. If Barclays PLC was to experience either of the two problems, explain how each would affect its balance sheet? [8 marks] (c) Following its collapse during the 2008 global financial crisis, Northern Rock's balance sheet revealed its reliance on funding in money markets. Explain Northern Rock's pitfall of relying on money market funding relative to customer deposits to meet its short-term liquidity to refinance its short-term loans. [11 marks]
