CASE STUDY INSTRUCTIONS
The following articulates the overall basic procedure and presentation details for last phase of your case.
PURPOSE
The purpose behind the case study was: (1) help you develop a strong awareness of the financial structure of financial institutions – in particular, a commercial bank; (2) further your financial analysis skills; and (3) broaden your understanding of the risks and strengths inherent in commercial banking.
For this last part:
• Using data previously calculated in Parts I and II, assess the soundness of your bank by determining the following:
o What level of risk does your bank face, as defined by (a) destruction of CET1 capital due to loan failure, (b) liquidity crisis due to destruction of readily available capital from OBS liabilities exercise or default?
o What percent of loans (and their notional value) need to fail before the bank’s capital destruction leads to regulatory action?
o What percent of OBS liabilities default (and their notional value) would lead to regulatory action?
o Does the composition of bank’s loan portfolio and/or its OBS liability structure suggest unusual risks to the bank that are not ameliorated by means of hedges?
PROCEDURE
Your narrative, when submitted, should contain as a minimum the following:
Contents written, no more than 4 pages, typed, no less than 11 PICA(any narrative in excess of four pages WILL NOT BE READ), but more than 2 pages:
• Summary of key financial findings –
o This is a cut-and-paste of the calculations requested in Parts I and II. IF I HAVE SUGGESTED OR STATED OUTRIGHT THAT YOUR CALCULATIONS WERE SUSPECT, YOU HAVE THIS OPPORTUNITY TO CORRECT THEM, BASED ON THE REVIEWS WE DID IN CLASS
• Narrative –
o A brief BUT PRECISE summary of your data analysis findings, UNLESS YOU FEEL A MORE DETAILED NARRATIVE IS NECESSARY.
o YOUR ANALYSIS OF THE FINANCIAL INSTITUTION’S SOUNDNESS. This section may employ comparative, general financial institution data and would be best NOT in bullet format.
o YOUR ANALYSIS OF THE RISKS FACED BY YOUR BANK, IN PARTICULAR, OBS RISKS.
As you can see, this is open-ended and flexible. This is the ultimate test of your ability to perform analysis, to actually think about the issue, and to use your intelligence and knowledge attained in this class. The grade is based on the rubric at the end of the instructions.
Upload directly to Canvas; I will only accept paper copies on an emergency basis.
DUE DATE:
May 10, 2020, 11:59pm.
GRADING RUBRIC:
DOES NOT MEET MINIMUM – DOESN’T UNDERSTAND AT ALL
GRADE: 50% OR LESS OF MAX PTS MEETS MINIMUM – MERELY GETS THE JOB DONE – FOLLOWS INSTRUCTIONS
GRADE: 50 – 65% OF MAX PTS ABOVE AVERAGE – I.E., THINKS
GRADE: 65 – 85% OF MAX PTS OUTSTANDING – I.E., THINKS OUTSIDE THE BOX
85 – 100% OF MAX PTS.
ARTICULATES THE FINANCIAL STRENGTH AND RISKS OF THE SUBJECT
MAXIMUM POINTS: 25 FAILS TO RECOGNIZE THE CASE SUBJECT’S ISSUES AND/OR FAILS TO UNDERSTAND THE NATURE AND PURPOSE OF THE CASE STUDY. DEMONSTRATES AN UNDERSTANDING OF THE PROBLEM ONLY. NO FURTHER RELEVANT ELABORATION DEMONSTRATES A THOROUGH UNDERSTANDING OF THE SUBJECT’S FINANCIAL STRUCTURE AND ITS RAMIFICATIONS. DEMONSTRATES A THOROUGH UNDERSTANDING OF THE SUBJECT’S FINANCIAL STRUCTURE AND ITS RAMIFICATIONS. RELATES THE PROBLEM TO RECENT PRACTICES, AND/OR USES OTHER SOURCES TO EXPLAIN PROBLEM RAMIFICATIONS
ANALYSIS & LOGIC OF ANALYSIS
MAXIMUM POINTS: 25 FAILS TO REACH LOGICAL CONCLUSIONS FROM DATA PRESENTED. REACHES BASIC CONCLUSIONS. REACHES CONCLUSIONS WHICH DEMONSTRATE THOROUGH UNDERSTANDING OF THE ANALYSIS. REACHES CONCLUSIONS WHICH DEMONSTRATE A THOROUGH UNDERSTANDING OF THE ANALYSIS AND THE ABILITY TO PLACE IN HISTORIC OR CURRENT CONDITION CONTEXT.
OFFERED CONCLUSIONS
MAXIMUM POINTS: 15 NONE OFFERED. OFFEREED SOME CONCLUSION, NOT STRONGLY THOUGHT OUT OFFERED CONCLUSION WITH LOGIC AND FORESIGHT. OFFERED CONCLUSION WITH EXCEPTIONAL SOPHISTICATION – THOUGHT “OUTSIDE THE BOX”.
SOPHISTICATION OF PRESENTATION
MAXIMUM POINTS: 5 USES LESS THAN HIGH SCHOOL ENGLISH, SLANG, AND TEXT JARGON. (IN FACT, IS IT REALLY ENGLISH?) USES UNDERGRADUATE-LEVEL LANGUAGE; NOTHING SPECIAL. DEMONSTRATES GOOD VERBAL SKILLS AND A SOPHISTICATED VOCABULARY. DEMONSTRATES OUTSTANDING VERBAL SKILLS AND HIGHLY EFFECTIVE AND SOPHISTICATED VOCABULARY
