(2) Give a possible reason for the decrease of the provision for loan loss ratio in 2006. In general, what is the relationship between the provision for loan loss ratio and the risk of outstanding loans?

Year: 2006 (In million $) Balance Sheet Year: 2005 Assets Cash 36,999 Short term securities with interest purcha 149,785 Investment securities with interests 245,315 Loans 573,791 Allowance for loans and lease losses 8,045 Net loans 565,746 Premises and Equipment 7,786 Trading account securities 131,707 Time deposits placed 12,800 Intangible assets 51,354 other assets 90,311 Total Assets 1,291,803 36,429 135,478 192,846 706,490 9,016 697,474 9,255 153,052 13,952 75,084 146,167 1,459,737 Liabilities Non-interest deposits Interest bearing deposits Short term debt Other liabilities without interest Short term securities with interest sold Long term debt Total Liabilities 186,736 447,934 116,269 97,828 240,655 100,848 1,190,270 184,808 508,689 141,300 126,141 217,527 146,000 1,324,465 Total Equity 101,533 1,291,803 135,272 1,459,737 Income Statement Total interest income Total interest expense Total non-interest income Total non-interest expense Provision for loan losses Income Taxes Special items Year: 2005 Year: 2006 58,626 78,585 27,889 43,994 26,438 37,989 28,269 34,792 4,014 5,010 8,015 10,840 (412) (805) Net income from continuing operations Net income from total operations Net Income 16,465 16,465 16,465 21,133 21,133 21,133