Banking Management Case study

Suppose that First national bank has the following balance sheet Position & that the required reservation on deposits is 25%

Reserve 60m

Loan 75m

Securities 20m

Deposits 150 m

Bank capital 5 m

a- It the bank suffers a deposit outflow of 20M. What its balance sheet look like? Must the bank make any adjustment?

b- Suppose the bank now is hit by another 10M. Of another outflow. What a balance sheet look like? Must the bank make any adjustment, why?

c- If the bank is now hit by another 5M. Of withdrawers of deposits what a balance sheet look like? Must the bank make any adjustment, why?

d- What the final picture of this commercial bank balance sheet and how much do this bank have Excess reserve now?

e- If the Central bank decided to increase the Monetary base by increase give this bank loan by 100M, Illustrate the Multiplier deposit expansion process using T- Account & assuming that Bank use all its excess reserve to grant loan, carry on example though banks A, B, C starting by 100 check able deposit & Required Reserve Ratio equal 5%.