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Question
a) What are the mandatory Prompt Corrective Action (PCA) Provisions for an undercapitalized bank? Explain why these provisions are required.
b) Why does one of the mandatory PCA Provisions for a critically undercapitalized bank include appointing a receiver/conservator within 90 days?
Answer
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Related questions
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What is the total amount of net fee revenue generated from the mortgages over the year?
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A _____ position in T-bond futures should be used to hedge falling interest rates and a _____ position in T-bond futures should be used to hedge falling bond prices.
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A bond portfolio manager has a $25 million market value bond portfolio with a 6-year duration. The manager believes interest rates may increase 50 basis points. Which of the following could be used to help limit his risk?
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A. I only
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A macro hedge is a hedge of a particular asset or liability exposure to a change in a macroeconomic variable.
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Buying a cap is similar to buying a call option on bond prices.
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Figure 22-3 A thrift has an annual CGAP of -$25 million. A credit union has an annual CGAP of +$5 million. The thrift has total assets of $500 million and net income of $7.5 million and the credit union has total assets of $40 million and net income of $0.7 millionCalculate each institution's CGAP as a percent of assets. Based on the gap, which institution's NII is more sensitive to interest rates? Explain.
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The bank's one-year repricing gap is (Million $)A. $425.B. $285.C. $74.D. $140.E. $66.
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Due to convexity problems, banks are actually better off using the simpler repricing model to manage interest rate risk rather than the duration model.
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The cash flow from the interest a bank receives on a long-term loan that is normally reinvested is called the runoff from the loan.
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If a bank has a negative repricing gap, falling interest rates increase profitability.
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In a bank's three-month maturity bucket, a 30-year ARM with a rate reset in six months would be considered a fixed rate asset, but in its one-year maturity bucket, this ARM would be considered a rate-sensitive asset.
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Why might a bank face abnormal deposit drains?
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Explain the relationship between each of the following ratios and liquidity risk.
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c) Loan commitments to total assets
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Explain how liquidity risk can lead to insolvency risk.
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In the absence of deposit insurance, a deposit is a _______________ to the bank's assets.A. pro rata claimB. first come/first serve claimC. full pay or no pay claimD. both A and BE. both B and C
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The BIS recommends that depository institutions do which of the following to realistically measure liquidity risk?I. Construct a maturity ladder of funding requirements over both the short and long run.II. Conduct scenario analyses of the bank's implied liquidity position under different bank and economic conditions.III. Always keep the loan to deposit ratio less than one.A. I onlyB. II onlyC. I and II onlyD. II and III onlyE. I, II, and III
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A bank meets a deposit withdrawal with one of the following alternatives. Which one of the following is an example of using stored liquidity to meet a deposit withdrawal?A. Increase in Euro dollar depositsB. Contacting an investment banker to find new corporate depositsC. Increasing Fed funds borrowedD. Issuance of a negotiable CDE. Selling the bank's holdings of T-bills
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A four-class CMO has Class A, Class B, Class C, and the residual Class Z securities outstanding. Which class has the longest duration?
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B. Class B
C. Class C
D. Class Z
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B. the bonds had variable interest rates.
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D. the bonds were uncollateralized.
E. none of the above
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