Wednesday, November 27, 2019

Using the example (simplified) bank balance sheet below show and explain why the Leverage And Capital Ratios are changed as a result of a 6m write-down in mortgages Essay Example

Using the example (simplified) bank balance sheet below show and explain why the Leverage And Capital Ratios are changed as a result of a 6m write-down in mortgages Essay The initial balance sheet shows that the total equity is  £16m and the total asset is  £305m. After the written-down of  £6m on mortgages, the mortgages have converted  £120m into  £114m so that the new total assets change to  £299m. In addition, due to the decrease of total assets, the total equity also turned into  £10m In order to make the total equity equal to total assets. As we know, the formula of leverage ratio and capital ratio is: Leverage ratio= Total Equity/Total Assets *100% We will write a custom essay sample on Using the example (simplified) bank balance sheet below show and explain why the Leverage And Capital Ratios are changed as a result of a 6m write-down in mortgages specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Using the example (simplified) bank balance sheet below show and explain why the Leverage And Capital Ratios are changed as a result of a 6m write-down in mortgages specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Using the example (simplified) bank balance sheet below show and explain why the Leverage And Capital Ratios are changed as a result of a 6m write-down in mortgages specifically for you FOR ONLY $16.38 $13.9/page Hire Writer Capital ratio= Total Equity/Risk-adjusted assets *100% So, as the changing of total equity and total assets, the leverage ratio also change at the same time. Due to the changing of mortgages, the risk-adjusted assets of mortgages also change so that the total risk-adjusted assets turned into  £191m compared with previously figure  £194m. Therefore, capital ratio has changed attributable to changing of total risk-adjusted assets. In a word, the leverage ratio and capital ratio are changed as a result of a  £6m write-down in mortgages. Part B: In the event that this write-down in mortgage assets was widespread; explain what measures all banks would have to take in order to rebuild their capital ratios back to the required minimum of 8%. Answer: 1. The first method is by increasing total equity (with no change in risk-adjusted assets) 1. As we know, the capital ratio = total equity/ risk-adjusted assets *100% From the table, we can see the current capital ratio=5.24%.the target capital ratio =8%.given the risk-adjusted assets  £191, we suppose to find how much total equity is need to achieve capital ratio of 8%? Assume X=total equity. 8%=X/ £191m*100% X= £15.28m. In conclusion, total equity most increase to  £15.28m to achieve the capital ratio of 8% with no change in risk-adjusted assets. 1. From the table we can see, given the bank has £10 in total equity. From 1 X is given  £15.28m. X- £10m= £15.28m- £10m= £5.28m. In conclusion, bank needed additional equity  £5.28m from the existing equity of  £10m to achieve the total equity of  £15.28m so that the capital ratio of 8% can be achieved. 1. The second method is by decreasing risk-adjusted assets (with no change in equity) 1. With no change in equity, we calculate the total risk-adjusted assets. Using  £10m in equity The total risk-adjusted assets= £10m/8% *100%= £125m. In conclusion, assume total equity is fixed; the total risk-adjusted assets have to decrease to  £125m in order to achieve the capital ratio of 8% 1. Form the table, we can see, current risk-adjusted asset = £191m and the target risk-adjusted asset = £125m. The change of risk-adjusted asset =new risk-adjusted assets-old risk-adjusted assets= £125m-  £191m=- £66m. In conclusion: the total risk-adjusted assets must reduce by  £66m in order to get  £125m so that the capital ratio of 8% can be achieved. 2. We now have to change the composition of Assets to make risk-adjusted assets= £125m Because the risk weight of loans and advances is 100%. We need to make it smaller, old loans and advances= £125m, new loans and advances=old loans and advances +changes in composition of assets= £125m+ (- £66m) = £59m. In conclusion, to achieve the value of risk-adjusted asset= £125m, we need to reduce the loans and advances by £66m in order to get the new loans and advances = £59m 1. In order to achieve liabilities=assets, we also need to change the value of cash in tills. New cash in tills balance= current cash in tills + change in composition of assets= £5m+ £66m= £71m. In conclusion, to achieve the value of risk-adjusted asset= £125m, we not only need to reduce the loans and advances, but also need to increase the cash in tills by  £66m in order to get the new cash in tills = £71m. By reduce the loans advances and increase the cash, which will reduce the lending. The liquidity ratio will increase lead to the credit crisis. [C]New balance sheet with the capital ratio of 8% Liabilities  £m Assets  £m Risk Weighting Risk Adjusted Assets ( £m) Deposits Cash Current accounts 195 Cash in Tills 71 (0%) 0 Time deposits 94 Money at call 5 (0%) 0 Total Liabilities 289 Available for sale assets Gove Bonds ; Bills 10 (10%) 1 Other Bonds ; Bills 40 (20%) 8 Equity Shareholder Capital 7 Other assets Retained Profits 3 Loans and Advances 59 (100%) 59 Mortgages 114 (50%) 57 Total Equity 10 Total Liabilities + Equity 299 Total Assets 299 Total Risk- Adjusted 125 UK Liquidity Ratio 3.34% Leverage Ratio 3.34% Capital Ratio 8% Part C: Explain how, in rebuilding capital ratios, aggregate demand will change, as a result the economy as a whole, could slide into recession. Answerà ¯Ã‚ ¼ The bank starts to rebuild the capital ratios by reducing the risk-adjusted assets. Under the reducing the risk—adjusted assets, it will change the composition of the assets by reducing the loans ; advances and increasing cash in tills. It will cause the overflow of the liquidity. Bank is suddenly reducing profitability. Loans become lesser and lesser to firms, individuals and so on. The bank refused to give loans to others in order to rebuild the capital ratio to achieve a higher figure, which will cause the credit crisis. Assuming the entire bank do that, the aggregate will fall due to the falling of the consumption of domestically produced goods ; services and the investment. All of these are depend on loans. For people, they want to take loans from banks by buying cars and house. They also want to pay the educational fees. For the firms, they are in trouble they cannot finance the loans. Sometimes, they don’t have enough money to buy the new equipment and pay the sa lary to their employees, so they take loans from banks, the issue is they cannot take enough loans from banks so as to firms are tending to make less investment. Due to rebuilding capital ratio, banks don’t want to give loans to others, the Cd will fall down. As a result, the economic will go into the recession. The economic will experience a huge fall in terms of their aggregate demand. Also, the banks start to rebuild the capital ratio by increasing the equity. Through increasing retained profit, it can delay the payment of dividends and increase its loans rates ; bank charges, or by laying off staff and closing underperforming branches so that it will cause the increasing of the unemployment rate and reducing spending. Everything is tending to fall. Spending lesser and lesser, the aggregate demand will fall. Thus, GDP will fall leading to the recession.

Sunday, November 24, 2019

Homeless vote essays

Homeless vote essays Los Angeles social advocates, who were the first in the nation to submit homeless shelters as polling place, are working to increase the numbers of homeless and low-income voter who vote. They hope to register 5000 new voters and plan extensive voter education and mobilization drives before Nov. 2. In California, several ballot initiatives are particularly compelling to homeless and low-income individuals. According to the National Coalition for the Homeless, voter registration drives show that about 60% of homeless people identify themselves as Democrats, 20% as Republicans and 20% as independents. The overall number of homeless people appears to be growing. Census data from 2000 show that homeless and low-income individuals are the least likely to register to vote and the least likely to turn out at the polls, but they are surprisingly well informed about local, national and even international events. Los Angeles registration drives have been a model for other cities for concentrated homeless population. Homeless people have the right to vote, and hope to register hundreds of them for this year's elections, to make sure their voices are heard on social issues and to encourage them to participate actively in society. As an example of how homeless people could make a difference by voting, 2000 Florida presidential election results, in which W. Bush beat Al Gore by only 537 votes to win the presidency. By exercising their right to vote, it makes them feel like they are part of a community, whether they are living at the LAX or one of the downtown bridges. ...

Thursday, November 21, 2019

Ethnocentrism Article Example | Topics and Well Written Essays - 500 words

Ethnocentrism - Article Example The only reason behind such a behavior was ethnocentrism. Of importance is the fact that ethnicity is not related to the biology of a person, therefore being alterable and flexible. This is not true for race, which is considered to be the innate qualities of a person, which therefore is unalterable and fixed. Therefore, we can infer that race is a profound reality based on biological origins while ethnicity is relatively superficial. Ethnocentrism therefore does not gives importance to the physical characteristics of a person as long as that person remains a member of that culture. Contrary to this, racism does not give importance to cultural attachment. Rather it favors those who are biologically similar. Racism therefore fails to accommodate those who have similar ideas and interests but are biologically different. The delivery of health care to growing populations of multiple ethnicities in modern day world is a challenge for modern day health care providers. Lapses in cross-cultural communication and mutual understanding which mainly stems from the ethnocentric behavior of health care professionals result in non-compliance of the patients (Thiederman, 1986). Differences in religions and practices may in turn become the cause of disliking a patient by the health care providers. Superstitious behaviors may lead a health care provider to think that patient has some mental abnormality, while the patient is merely practicing what he believes in. Such matters require careful consideration by the health care providers to avoid causing loss to patients. Similarly, patients may suffer from poor standard of care due to the fact that a particular health care provider dislikes a particular ethnicity. Vienna Declaraction states that â€Å"the universal nature† of all human rights and fundamental freedom is â€Å"beyond question† (Ayton-Shenker,