Allotted country: Taiwan

The total deposits are 148,853,513

Total checkable=26,473,708

Current Reserves=11,838,682

The reserve requirement will be 10% of total deposits= 14,885,351

CFO deposit=20% of total checkable=5,294,742

1.Assume that you are working for a very large corporate as CFO, and you decide to make a deposit in this bank which is equal to 20% of its total checkable deposits. The bank decides to lend the maximum of this amount in long term loans after ensuring the reserve ratio requirement which is 10% of their total deposits. Show all T-accounts entries that will have to pass in asset transformation and the final balances in these T-accounts.

2.Assume that the depositors withdraw an amount equal to 25% of total checkable deposits of the bank (current and saving accounts deposits) by writing checks that are deposited in other banks. What changes will occur in the T-accounts and their balances

3.What will happen to the reserve requirement? Is the bank in any kind of regulatory violation with respect to minimum reserve requirement? (Minimum Capital Requirement for commercial Banks in Pakistan is Rs. 10 billion and for Microfinance banks is 1 billion)

4.What options does the bank have?

5.Use one of the options from what you have learnt in the class to improve the liquidity of the bank showing the changes in T-accounts and the bank's balances.

6.Comment about the seriousness and soundness of the bank with regard to its Liquidity Management and whether the bank realizes the significance of holding excess reserves or not.

7.Similarly, on the above lines now assume that bank faces a major default which is equal to 20% of its total loan portfolio. What will be the impact on its capital? Show all changes in T-accounts and their balances. (Assume that capital Adequacy ratio required by SBP 15% of total loans)

8.What strategies are available with the bank for management of its capital? Chose one of the strategies showing changes in T-accounts and their balances.

9.Comment about the seriousness and soundness of the bank with regard to its Capital Management and whether the bank realizes the significance of holding excess capital or not.