QUESTION 6

As at the end of 2019 one notable bank among the first three banks which were affected by the banking sector clean-up had large number of cars and mortgages which it had taken lien over as collateral. Despite these securities, one of the major causes identified for the collapse of the bank was non-performing assets. This contributed to the bankruptcy of the bank since it was badly affected by ill-liquidity.

You are required to explain why the securities could not protect the bank from bankruptcy?

QUESTION 7

K & P Construction company won a contract from the government to construct a road. They approached your bank for credit advance to enable them execute the contract. They pledge the contract sum as security.

What due diligent should your bank perform to safeguard itself?