Analysis of Financial Institutions

Question 1

What is the liquidity coverage ratio

Answer 1

Cash / One month liquidity needs

LCR is expressed as the minimum % of a bank expected cash outflows that must be held in highly liquid assets

Question 2

CAMELS: Capital Adequacy

Answer 2

The ability of a bank to absorb losses without resulting in financial weakness or insolvency.

Portion of the banks asset funded with capital.

Capital Adequacy is based on RWA

Question 3

CAMELS: Asset quality

Answer 3

Amount of credit risk associated with the assets.