We have the balance sheets for two banks.

a) Fill in the missing entries (denoted ????) for both banks. Be sure to note which bank you are referring to.

b) What is the leverage ratio in each bank?

c) Suppose that as a result of collapsing oil prices the value of the loans bank B has made falls. Bank B can pay back only 450 to bank A. Now redo the calculations from part (a) for bank A.

d) What conclusions can we draw about systematic risk in the banking system from this example?

Balance Sheet Bank A Assets Liabilities Cash 100 Deposits 900 400 Loans to Business Firms Loans to Bank B Total Assets 500 ???? Total Liabilities ???? Equity ???? Balance Sheet Bank B Assets Liabilities Loans to oil fracking firms 800 Deposits 250 500 Loan from Banka Total Liabilities Total Assets ???? ???? Equity