Question 2

In addressing the next strategy for the bank, one of the bank managers argued that; because diversification is a desirable strategy for avoiding risk, it never make sense for a bank to specialize in making specific types of loans

(I) You as the bank manager for another branch, would you agree or not to this statement? State your justifications.

(10 marks)

(II) Should you notice that the bank is also facing some liquidity issues, identify the four strategies that they can use in detail, and suggest the one which you believe would be the most suitable strategy to be adopted by the bank.

(15 marks)