Groups $1-5$ answer questions $1,3$ and $5$

Groups $6-10$ answer questions $2,4$ and $5$

Question $1$

a$)$ Emily Mensah is a Treasurer of Ansaba Bank Limited. During ALCO last month members

expressed concern about the continuous increase in interest rates over the next $1$ year and

its impact on the bank's net interest income. The Treasurer was therefore tasked to make a

presentation to ALCO at the next monthly meeting on the interest rate risk the bank currently

has and what should be done to hedge this risk.

She has gathered the following extracts from the bank's balance sheet as at ${31}^{st}$ December

$2023$

Assets

Consumer loans $-$ GHS $300$m$,7$ year maturity with rates fixing every $3$ months

Corporate Loans $-$ GHS $250$m$,2$ year tenor with $6$ months rate fixing.

Mortgage Loans$-$GHS $100m,25$ year maturity with $1$ year rate fixing

Fixed rate loans $-$ GHS $650m,5$ year personal loans.

Government Securities$-$GHS $150m91$ day, $200$m $182$ day and $2$ year $140m$ bond.

Interbank Lending$-$GHS $50m$ invested for $1$ week

Fixed assets$-$GHS $120m$

Cash$-$GHS $140m$

Liabilities

Current Accounts $-$ GHS $200$m

Savings Accounts $-$ GHS $150m$

Time Deposits $-$ GHS $550$ m with $12$ months maturity

Negotiable Certificate$-$GHS $300m6$ months maturity

Interbank borrowings$-$GHS $200m$ with $7$ days to mature

Subordinated debt$-$GHS $200m$ with rates fixing every $6mth$

You are required to:

i$)$ Calculate the $12$ months Rate Sensitive Assets $($RSA$),$ Rate Sensitive Liabilities and Re$-$

pricing gap.

ii$)$ Calculate the impact of a $300$ basis point increase in interest rate on the bank's net

interest income over the next $12$ months

iii$)$ Calculate the impact on the bank's net interest income if as a results of increase in market

interest rates, asset rates increase by $400$ bps whilst liability rate increase by $300$ bps$.$

iv$)$ Briefly highlights the bank can do to minimize its interest rate risk position.Question $5$

a$)$ Explain what is meant by credit appraisal? What are the components of Credit

Appraisal?

b$)$ Baidu Bank Ghana $($ABG$)$ Ltd is a newly licensed bank in Ghana. ABG charges $2\%$

origination fees, $3\mathrm{.}50\%$ margin on loans with maturity above $3y$ rs$.$ The reference

benchmark rate for pricing the bank's loans is the Ghana Reference Rate $($GRR$).$ A

corporate client by name E$5$ limited is seeking to borrow GHS $200m$ for $5yrs.$

i$)$ Calculate the Ghana Reference Rate

ii$)$ Calculate the expected Interest Rate to be paid by E$5$ Limited. What if the loan

is for $2$ years?

Assume current $91$ day rate is $28\mathrm{.}59\%,$ Interbank Rate is $29\mathrm{.}64\%$ and the Monetary Policy Rate

is $29\%.$ Cash Reserve Requirement is $15\%$ and Cash in Vault $($CIV$)$ is $2\%.$