Fundamentals of Bank Management Assignment FINM301

Assessment 2: Fundamentals of Bank Management Assignment:

Explanation of bank assets from a risk and profitability perspective

The curriculum of the unit Fundamentals of Bank Management is focused on the financial institution environment, the financial statements of banks and measuring their overall performance. An understanding of the different risk areas that banks are exposed to and the application of different financial models and methodology to manage these risks are regarded as important learning outcomes. Within this context, it is a well-known fact that financial institutions like banks have to manage their balance sheets and income statements to generate a return on assets and return on equity similar to any other type of business. The exception is that banks act as financial intermediaries and therefore they differ from other businesses in terms of asset and liability structures, income generation and cost of capital.

The purpose of the assignment is to expose students to real published financial information of three banks in the countries where the students are studying this unit in order to enable them to integrate the theory in the unit material with the real application of it in the banking industry.

The lecturers at the different campuses will confirm the three banks and the specific year of annual reports of the banks that students have to retrieve for completion of the assignment. (Mauritius students to use Mauritius bank information; and Bentley Campus students to use Australian bank information.) In addition to the published annual reports of the banks, students can use internet, text books, journal papers and newspaper articles to substantiate their answers.

The assignment assessment is conducted with a rubric that can be retrieved from the Unit assignment section on Blackboard. It provides students with a guideline of all aspects that will be considered during the marking of the assignment answers and the marks allocated to the different aspects.

The assignment answers should not exceed 2000 words and the Chicago referencing style should be applied.

Group work on the assignment.

All students must complete the assignment in groups of two students. Students have to make up their own groups before the discussion of the assignment commences during tutorial sessions. Whilst the group should assign tasks according to the capabilities of individual members, the group must ensure that all tasks required to successfully complete the assignment are allocated. If one person performed all the work, this is not team work! In the event of a conflict within teams, students must undertake the following process prior to presenting their concerns to the lecturer:

• Students must address issues early (do not leave the problem until the week before the assignment is due);

• Call a meeting with the other group member to discuss a concern or a breach of agreement; and finally, if resolution is not achieved, request mediation by the lecturer.

Students who are not prepared to work appropriately in teams will be required to undertake the full assignment individually.

Assignment submission

The assignment has to be submitted via Turnitin.

Assignment structure guidelines for students:

Students are required to apply the following structure to their assignment:

Step 1. Write a paragraph introduction about the aim of the assignment and the significance of the information in the assignment answers.

Step 2: Compile a table with the following data from the three different banks that your lecturer specified:

When constructing this table please note that:

• The annual reports of banks are normally for the total group of companies with consolidated figures and separate figures for the bank only (parent entity). Please use group figures when they are available. Otherwise, company (bank only) figures are applied.

• Other assets include all the assets except for cash, trade securities, investment securities, and loans.

Step 3: Discuss each of the asset types contained in the table that you constructed in step 2 by providing the following explanations:

1.Cash

a. The purpose and importance of the type of asset.

b. The average monetary size (as % of total assets) of banks and differences between the % sizes of this asset between banks. If the differences in the % sizes of this asset between banks are significant, please try to provide possible reasons for the differences by considering information provided in the annual reports of the banks.

c. The risks that the bank run due to holding/not holding the type of asset.

d. Methods/instruments that banks use to hedge the risks pertaining to this type of asset.

e. The income generated from the type of asset compared to the income generated from other types of assets.

2.Trade securities

a. The purpose and importance of the type of asset.

b. The average monetary size (as % of total assets) of banks and differences between the % sizes of this asset between banks. If the differences in the % sizes of this asset between banks are significant, please try to provide possible reasons for the differences by considering information provided in the annual reports of the banks.

c. The risks that the bank run due to holding/not holding the type of asset.

d. Methods/instruments that banks use to hedge the risks pertaining to this type of asset.

e. The income generated from the type of asset compared to the income generated from other types of assets.

3.Investment securities

a. The purpose and importance of the type of asset.

b. The average monetary size (as % of total assets) of banks and differences between the % sizes of this asset between banks. If the differences in the % sizes of this asset between banks are significant, please try to provide possible reasons for the differences by considering information provided in the annual reports of the banks.

c. The risks that the bank run due to holding/not holding the type of asset.

d. Methods/instruments that banks use to hedge the risks pertaining to this type of asset.

e. The income generated from the type of asset compared to the income generated from other types of assets.

4.Loans

a. The purpose and importance of the type of asset.

b. The average monetary size (as % of total assets) of banks and differences between the % sizes of this asset between banks. If the differences in the % sizes of this asset between banks are significant, please try to provide possible reasons for the differences by considering information provided in the annual reports of the banks.

c. The risks that the bank run due to holding/not holding the type of asset.

d. Methods/instruments that banks use to hedge the risks pertaining to this type of asset.

e. The income generated from the type of asset compared to the income generated from other types of assets.

Step 4. Summary/conclusion: Use the information contained in the table (step 2) and your answers provided in step 3 to write up a conclusion about whether the average monetary/percentage sizes of the different assets are optimum or whether banks can increase/decrease the sizes of the different assets to increase their profits without unacceptable increasing risks to the banks.