Recap on Financial Markets - Investment Banks

Which of the following is an asset on a retail bank's balance sheet?

• Share Capital

• Advances

• Long Term Borrowing

• Retained profit

Which of the following is a liability on a retail bank's balance sheet?

• Deposits

• Cash

• Bills

• Investments

When is a bank technically bankrupt?

• If the workers leave

• If the reduction in the bank’s assets wipes out the whole of the bank’s capital

• If it makes a loss instead of a profit

• If the firm fails to make a profit for 2 consecutive quarters

Which two of these are fundamental reasons why a bank fails?

• It suffers from a fall in the value of its assets that is so large that its capital is wiped out and it becomes insolvent.

• The bank has a high positive spread.

• Customers choose to spend almost all of their wages each month.

• It does not have sufficient liquidity to meet the legitimate demands of its depositors.

Which of these activities is carried out by an Investment bank?

• Provide loans and overdrafts to small businesses

• Provide an efficient means of payment

• Accept deposits from households

• Help governments to privatise a public sector enterprise

If the ‘liquidity coverage ratio’ increases from 10% to 20%, what will happen to the maximum amount of loans a bank can give out?

• Rises

• Falls

If a bank is determined to maintain or increase its lending what might it choose to do in the face of rising liquidity ratios?

• Print more money

• Issue more shares or bonds

• Increase dividends

• Raise bonuses