just part A is cool

(i) Build Western Banks balance sheet incorporating all the above items. [Incorporate all the items in one single balance sheet. Identify clearly the balance sheet item name and the value.]

(3 marks)

(ii) Identify the components of Western Banks regulatory total capital and calculate Western Banks regulatory total capital.

(2 marks)

b) Starting from the situation described in a) consider the following operations:

(1) The market value of the shares held by Western Bank for trading purposes decreases by $6 billion.

(2) The market value of the government bonds held by Western Bank for liquidity purposes increases by $4 billion.

(3) Western Bank writes off $10 billion of loans made to households, and has access to the lending provisions from a).

(4) Western Bank receives $15 billion coupons from governments that do NOT have an account in the bank.

(5) Western Bank buys company cars for $0.1 billion from a dealer that is a customer of the bank.

(i) Using one new balance sheet (separate from the one in a), represent the effect of the 5 operations above on the balance sheet of Western Bank. [Only represent variations, not new levels. Identify clearly the balance sheet item name, the variation sign and the value. Indicate the numbering of the transaction at the end of each entry. You are allowed to add new entry names if you need them]

Western Bank has the following entries on its balance sheet (expressed in $billi ESF 12 Accumulated retained profit 200 Certificates of Deposits on issue 630 Loans to households 752 Capital notes on issue 14 Demand deposits of customers 150 Shares on issue 16 Provisions for bad and doubtful debt for loans to 4 4 households Loans to another bank 200 Capital Reserve 20 Shares investment (trading) 40 Government securities (available for sale) 30