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Let's consider two banks: Bank A and Bank B COVID pandemic strikes banks: borrower default on $30 (unit in million) of the loans in both
Let's consider two banks: Bank A and Bank B COVID pandemic strikes banks: borrower default on $30 (unit in million) of the loans in both bank A and B. When banks write off the bad loans, the balance sheets of the two banks should look like (fill in numbers in the blank) Loans are subtracted from a bank's capital accounts, not from its obligations to others - i.e., depositors or those [Hint: Textbook 9.6 Insolvency on pages 277279 and from whom the bank borrowed. g) In the video, the professor talked about a bank faces the conflicts when chooses its capital-to-asset ratio (equity ratio). So, what is the advantage to have a higher capital/asset ratio? What is the advantage to have a lower higher capital/asset ratio? h) In a period of economic recession, if you were a banker, what is your choice (a higher or lower capital/asset ratio) and please provide your reason(s). Let's consider two banks: Bank A and Bank B COVID pandemic strikes banks: borrower default on $30 (unit in million) of the loans in both bank A and B. When banks write off the bad loans, the balance sheets of the two banks should look like (fill in numbers in the blank) Loans are subtracted from a bank's capital accounts, not from its obligations to others - i.e., depositors or those [Hint: Textbook 9.6 Insolvency on pages 277279 and from whom the bank borrowed. g) In the video, the professor talked about a bank faces the conflicts when chooses its capital-to-asset ratio (equity ratio). So, what is the advantage to have a higher capital/asset ratio? What is the advantage to have a lower higher capital/asset ratio? h) In a period of economic recession, if you were a banker, what is your choice (a higher or lower capital/asset ratio) and please provide your reason(s)
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