The Chief Executive Officer of Dynamic Commercial Bank (DCB) operating in the Caribbean has asked his team of Chief Risk Analysts to conduct a critical assessment of the banks financial statements to ascertain its financial health. This also fits within the context of the upcoming review by the regulator of Commercial Banks and as the bank seeks align is operations for the post COVD-19 reality and the current increase in inflation given the war in Ukraine and Russian. The team is asked to assess the banks asset quality, liquidity risk, capital adequacy, earnings,, sensitivity to market risk and the strength of its Board and Management Oversight function.

The financial statements will be uploaded in the Class News Forum and should aid in the assessment.You should analyze the banks performance as reflected in the financial statements below. Your analysis should include but not be limited to the following:

Important Notes

Management has been meeting on a weekly basis since the COVID 19 pandemic and the war between Ukraine and Russia to assess its impact of the banks asset quality, liquidity, capital adequacy, earnings and sensitivity to market risk.

The bank has a high concentration of loans directly related to the tourism sector.

In the past the bank has been plagued by weak credit administration standards and poor underwriting practices.

The bank has hired several new loan officers to handle problem credits from the past and those that have emerged since the pandemic and the war.

Up until nine months ago the bank has no internal loan review function.

Loan policy does not establish guidelines for portfolio mix by loan type.

The regulatory requires require primary ratio of 10% and Risk Weighted Capital Adequacy (RCWA) of 13%.

The bank introduced CD promotions in 2019 and 2020. While both promotions raised funds, management anticipates that upon maturity in September 2022, 60% (50billion) of the balance will run off as investors will seeking new opportunities and better rates. The central bank continues to increase its policy rates to combat rise in inflation although persons are seeking to recover from the COVID 19 pandemic.

The banks parent company continues to reduce its cash account which will most likely be depleted in only one year.

QUESTION:

Compare and contrast the operational and compliance challenges that DCB will face, assuming that have they operate in two jurisdictions (Jamaica, Trinidad or Barbados). Discuss how these challenges will impact the financial intuitions ability to offer a wide range of financial products to the public.