BANKING OPERATIONS LAB

ALL QUESTIONS ARE COMPULSORY

1. Calculate the Cook's Ratio from the data for a Bank given below;

Liabilities	Assets
Deposits	10,00,000	Fixed assets	1,900
		Forex/Gold	22,000
		Shares/Bonds	40,000
CAPITAL FUNDS	63,900	SLR	2,40,000
		CRR	50,000
		Risk Weighted Assets (RWA)	7,10,000
Total	10,63,900	Total	10,63,900

1. Calculate the General Market Risk charge from the following data ?

Infosys: - 100 short & 50 Long. Price is Rs.2000, Reliance: - 200 short & 500 long Price is Rs.120.

Net position - 50 short =? , Net position - 300 long = ?

Combined Net Position = ? and General risk Capital charge = 8% * Net Position = ?

1. Calculate the CRAR Ratio for an Indian Bank from the data given below;

Liabilities	Assets
Deposits	10,00,000	Balance in CA with Other Bank	200,000
		Residential Retail Mortgage Home loans < 30 lakhs with LTV < 75%.	500,000
		Shares/Bonds	100,000
CAPITAL FUNDS	1,00,000	Investment in Govt. Securities	200,000
		Balance with RBI	100,000
		Risk Weighted Assets (RWA)
Total	11,00,000	Total	11,00,000

1. Find out the Estimated Operation Risk Losses for Bank B from the data Below ?

Total Revenue of Bank A = 200 Crores, Total Revenue of Bank B = 100 Crores,

Observed Losses for Bank A= 1 Crores, 2^{alpha ()} =1.2. Estimated Operation Risk Losses Total Revenue of Bank .

1. Using the formula parameters (as appropriate) E* = max {0, [E x (1 + He) - C x (1 - Hc - Hfx)]}
   • E* = Exposure Value after Risk Mitigation

Calculate the RWA for both the cases from the data given below ? Where

• E = Current Value of the Exposure
• C = The current value of the collateral received (Financial Collateral)
• Hc = Volatility haircut appropriate to the collateral
• Hfx = Forex haircut appropriate for currency mismatch.
• RWA is calculated as RW ( of the Asset Class) x E*

Exposure	Case 1	Case 2
Amount	100	100
Base Maturity	2	3
Collateral maturity	2	3
Currency	INR	INR
Rating	BB	A
Haircut for Exposure	0.15	0.06
Instrument	Sovereign	Bank Bonds
Instrument rating	A	Unrated
Haircut for collateral	0.03	0.06
Exposure after haircut	115	106
Collateral after haircut	?	?
Net Exposure	?	?
Risk weight	150	50
Risk Weighted Asset	?	?

1. Let the collateral value 'C' = 50,000 Using the formula for adjusted collateral

Ca = C x (t-0.25) (T-0.25), where

T = min (5, residual maturity of the exposure) and

t = min (T, residual maturity of the Collateral).

Calculate 'Ca', the value of the adjusted collateral for maturity mismatch? Residual maturity of the exposure = 8 yrs and Residual maturity of the Collateral = 4 yrs

References: www.garp.com

Annexure 1

Classification of Claim

AAA to AA-

A+ to A-

BBB+ to BBB-

BB+ to BB-

B+ to B-

Below B-

Unrated

1.Claims on Sovereigns

0%

20%

50%

100%

150%

100%

2.Claims on Banks -

Option 1 (Based on Sovereign)

20%

50%

100%

100%

150%

100%

Option 2 -(Based on bank < 3months Maturity)

20%

20%

20%

50%

150%

20%

3. Claims on Corporates

20%

50%

100%

150%

100%

4. Claims on public sector entities

as Banks.

5. Claims on MDBs

0% RW for Claims on Basel MDB List

6. Claims on Securities Firms

as Corporates

7.Claims included in the regulatory retail portfolio (RRF)

75% or higher

8.Claims secured by Residential Property

35% or higher

9.Claims secured by Commercial Real Estate

100%

10. Past Due Loans

Category	% of Sp. Prov.	Additional Condition	RW
1. Qualifying Residential Mortgage Loans	>=20%	If Supervisor Allows	50%
<20%		100%
2. Other Past Due Loans	>=50%	If Supervisor Permits	50%
>=20%	If Supervisor Permits	100%
>=15% to <20%	If Supervisor Permits	100%
Others	Fully secured by ineligible collateral	150%

11. Higher Risk Categories

150% or Higher

Annexure 2

	Issue Rating	Residual Maturity (Years)	Haircut (%)
A	Sovereign Securities
	Any Rating	=1	0.5
i	1< M =< 5	2
	5	4
B	Debt Securities
	AAA to AA PR1/PP1/F1/A1	=1	1
ii	1< M =< 5	4
	5	8
	A to BBB PR2 / P2 / F2 / A2 /PR3 /P3 / F3 / A3 and Unrated Bank securities	=1	2
ii	1< M =< 5	6
	> 5	12
	Units of Mutual Funds/ Equities/Gold	1
	5
C	Cash In same Currency	0
D	Currency Mismatch	8