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Commercial bank management

Description of Assessment Task and Purpose:
Select a commercial bank of your choice and write a report of 3,000 words (+/-10%) in total that addresses all requirements listed below. You will need to inform your instructor the bank of your choice for approval before doing the assignment:
– Form a group of 3 – 5 students and do all calculations required for the following tasks in the same way. You must work in group to ensure that you have the same methodology and approach. Although your bank will be separately analysed, the ratios and formulas used must be the same for all banks in the group. This is to ensure that you can compare your bank with other banks easily.
– Your report must include an executive summary which summarizes the key findings of your research. (200 words) (5 marks)
– Discuss and compare the performance of your bank with other banks in your group over the last 3 years. You should explain any difference in performance between your bank and the group. Support your discussion with relevant calculations. Discuss if the performance justifies the movement of the share prices of the bank during the same period. (750 words) (20 marks)
– Discuss how the banking industry has been affected by the pandemic and based on that, make an assumption on the trend of the interest rates. Depending on your assumption about the trend (either increase or decrease), assume the magnitude of change is 1% in the next year, calculate the interest rate sensitivity gap and duration gap of your bank and compare with those of other banks in your group. You then discuss why your bank is different from other banks in terms of exposure to interest rate risk. You must provide necessary calculations and make clear any relevant assumptions for the calculations that you have made. (750 words) (20 marks)
– Now suppose the overall interest rate level is forecasted to go in opposite direction with your forecast above, also by 1% magnitude, in the next year, present a hedging strategy for the bank using financial future contracts. How many future contracts are needed? Support your answer with a diagram that represents the overall payoffs to the bank. (500 words). (20 marks)
– Using the financial statements of the bank, make any reasonable assumptions and calculate the one-year lending rate to a typical customer with a default risk 20% higher than the prevailing risk-free bond in the same market using the Cost Plus Loan Pricing method. (500 words) (20 marks)
– Make recommendations to the bank’s board of directors regarding any concern you may have about the bank’s performance using results from your answers to the above tasks. (200 words) (5 marks)
– Write a reflection statement on your group work (100 words) (5 marks)
In addition to the quality of the above works, the assessment marking is also based on the following criteria (5 marks):
– Structure and formatting.
– Number of references.
– Citations using Harvard Referencing System.
– Practical data from the case.
– Practical data from the real world.
– Logically developed and structured ideas.
Learning Outcomes Assessed:
– LO1 – The role of commercial bankers and the role of banking and financial services in the economy.
– LO2 – The ability to analyse and evaluate the performance of a commercial bank.
– LO3 – The ability to analyse and make decisions regarding taking deposits and non-deposit products, including using relevant contemporary risk management techniques.
– LO4 – The ability to analyse and make decisions regarding providing loans to business firms and other credit products, including using relevant contemporary risk management techniques.
Knowledge & Skills Assessed:
– Subject Specific Knowledge, Skills and Understanding: the ability to conduct a literature review and analysis; to search for and analyse relevant information from the company’s reports and statements; to understand the essential knowledge in relation to asset – liability management for bank managers.
– Professional Graduate Skills: the ability to work in group and independently; to demonstrate independence and personal responsibility, adaptability, communication, creativity, critical thinking, IT skills, self-reflection, problem solving, group or team skills, effective time management, working under pressure to meet deadlines.
– Emotional Intelligence: the ability of show self-awareness, self-management, awareness of others, managing and supporting others, motivation, resilience, self-confidence.
– Career-focused Skills: the ability to demonstrate understanding of bank management in general and asset – liability and risk management strategies in particular.
Assessment Submission Instructions:
Your coursework must be submitted through Turnitin link in Blackboard no later than. Please note if you miss this deadline, your overall mark will be deducted by 10 marks for each late day.
Date for Return of Feedback: 15 working days
Format for Assessment:
The assessment must be in the form of an executive report in which the executive summary should show the key findings and recommendations from the report. The main report should detail and name a title for each section required in the “Description of the Assessment”.
Marking Criteria for Assessment:
Criteria Max Marks
Well structured, formatted and presented 1 marks
Ideas logically developed 1 marks
– Your report must include an executive summary which summarizes the key findings of your research. (200 words) 5 marks
Average answer should just list the bullet points while good answers should provide a small discussion on what has been done and found.
– Discuss and compare the performance of your bank with other banks in your group over the last 3 years. You should explain any difference in performance between your bank and the group. Support your discussion with relevant calculations. Discuss if the performance justifies the movement of the share prices of the bank during the same period. (750 words)
Average answers should provide simple calculations of performance ratios including financial and risk ratio and those of two other banks. Better answers should critically compare and comment on the differences and the reasons for the differences among the banks. Better answers should also explain the movement of the share prices in line with the financial performance. 20 marks
– Discuss how the banking industry has been affected by the pandemic and based on that, make an assumption on the trend of the interest rates. Depending on your assumption about the trend (either increase or decrease), assume the magnitude of change is 1% in the next year, calculate the interest rate sensitivity gap and duration gap of your bank and compare with those of other banks in your group. You then discuss why your bank is different from other banks in terms of exposure to interest rate risk. You must provide necessary calculations and make clear any relevant assumptions for the calculations that you have made. (750 words)
Average answers should identify the balance sheet items that are subject to interest rate risk and then use the interest rate sensitivity and duration gap analysis to calculate the risk exposure. Better answers should show details of calculations, including the risk (gain/loss), the reasons and the sources for differences in risk exposure between their bank and other banks in the group. 20 marks
– Now suppose the overall interest rate level is forecasted to go in opposite direction with your forecast above, also by 1% magnitude, in the next year, present a hedging strategy for the bank using financial future contracts. How many future contracts are needed? Support your answer with a diagram that represents the overall payoffs to the bank. (500 words).
Average answers should normally focus only on calculations. Better answers should explain the rationale for using financing future contracts and how information is collected and assumptions are made for the calculations. 20 marks
– Using the financial statements of the bank, make any reasonable assumptions and calculate the one-year lending rate to a typical customer with a default risk 20% higher than the prevailing risk-free bond in the same market using the Cost Plus Loan Pricing method. (500 words)
Average answers should normally focus only on calculations. Better answers should explain the relevant assumptions made prior to making the calculations. 20 marks
– Make recommendations to the bank’s board of directors regarding any concern you may have about the bank’s performance and their risk management strategy. (200 words)
Average answers should address the findings from the performance and interest rate risk analysis. Better answers should discuss the solutions to these problems. 5 marks
– Write a reflection statement on your group work (100 words)
Average answers should describe what they have done. Better answers should say more about what they have learn from group work. 5 marks
Good references and examples used in the work. 1 marks
References are cited properly. 1 marks
Practical data and information from the real world 1 marks
Total 100 marks
Please note that all work is assessed according to the University of Lincoln Management of Assessment Policy and that marks awarded are provisional on Examination Board decisions (which take place at the end of the Academic Year.
Feedback Format:
– During the class time, and where the lecture themes are relevant, you will be given the verbal feedback in the form of sharing experience about what should and should not be done drawn upon past years.
– The final feedback will be in a form of a short report in which it specifies what you have done well and what should be improved for each of the required sections as per the “Description of Assessment”.
– In addition, you will have the opportunity to meet face-to-face and discuss with the instructor at your request about your works in progress; as well as receive verbal feedback in the class on generic and common issues regarding the assessment.
– The opportunity for face-to-face feedback and discussion at is also available after assessment submission at your request.

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