Fin-4723 Bank Management

FIN-4723 – BANK MANAGEMENT TEST 1 – FALL 2006 – REVIEW QUESTIONS

1. What is a bank? Present at least three definitions.

2. What are the basic objectives of banking regulation? How do regulators attempt to achieve these objectives?

3. What does the acronym CAMELS refer to in bank examinations? What are the most important facets of an examination? What financial ratios might best capture each factor of the CAMELS?

4. List and describe the major aspects of at least four major pieces of banking legislation. In your answer include such elements as the time period and economic circumstances that existed when the legislation was passed, what the legislation was proposed to accomplish, what the outcome has been as a result of the legislation and for the legislation, etc.

5. Explain what the regulatory dialectic is and give an example.

6. Who are the outside directors of a bank? Inside directors? What are the duties of outside directors? To whom are the directors responsible/accountable?

7. List and define/describe three entities that are competitors of banks. What types of services do they offer that compete directly with the services offered by banks? Who has the advantage in this competition? Why? Devise a strategy to compete in this environment.

8. What are the major categories of bank assets and their approximate percentage contribution to total resources (assets)? What are the major categories of liabilities? Is there a difference in the composition of the assets, liabilities, and capital between large banks and small banks? What are the major differences?

9. What are the primary sources of risk bank managers face? Describe how each potentially affects bank performance. Provide one financial ratio to measure each type of risk and explain how to interpret high versus low values.

10. Define each of the following components of the return on equity (du Pont) model and discuss their interrelationships: a. ROE b. ROA c. EM d. ER e. AU 11. What ratios on common-sized financial statements would indicate a small versus a large, multibank holding company? Cite at least five ratios.

12. What is the UBPR? What are the major components of the UBPR?

13. What is the NIM? What is burden?

14. What are the major categories of income and expense for a bank? What is the largest income component? What is the largest expense component?

15. Be prepared to reconstruct a bank’s balance sheet and income statement when given various assets, liabilities, capital, income, and expense accounts.

16. Be prepared to write an analysis of your bank using the UBPR that you downloaded. In this analysis, you should be able to include profitability, efficiency, liquidity, capitalization, and risk evaluations for your bank relative to its peer group and relative to the trend of performance.