Kindly use the Basel one framework to answer this question.
Show the detailed workings for all questions
For question a kindly list the assets and the related risk needed to compute the risk weighted assets.
For question c Use the following formulas
asset to capital multiple= banks total asset÷total capital
Cooke ratio = total regulatory capital÷total risk weighted assets
Cooke ratio= total tier 1 capital÷total risk weighted assets.
Kindly list all the items that you use from the financial statements in your calculations so that I can easily follow through.QUESTION ONE.
Nkumbu Bank income statement for the year ended 31st December 2015
|
INTEREST INCOME
|
|
|
Loans and advances from normal deposits (excluding leasing income)
|
7,602
|
|
Local currency loans (Retail)
|
5,686
|
|
Local currency loans (Corporates)
|
966
|
|
Foreign currency loans (Retail)
|
93
|
|
Foreign currency loans (Corporates)
|
856
|
|
Loans and advances from re-finance credit (including leasing income)
|
0
|
|
Local currency loans
|
0
|
|
Foreign currency loans
|
0
|
|
From banks and other financial institutions (including OMO deposits)
|
649
|
|
Domestic institutions
|
164
|
|
Foreign institutions
|
485
|
|
Bank of Zambia
|
0
|
|
Securities:
|
2,478
|
|
Treasury bills (investments)
|
1,074
|
|
Government bonds (investments)
|
1,175
|
|
Statutory bonds (investments)
|
0
|
|
Money market instruments (investments)
|
0
|
|
Other securities (investments)
|
0
|
|
Trading securities (all classes as above)
|
229
|
|
Leasing income from normal deposits
|
0
|
|
Credit cards
|
0
|
|
All other
|
0
|
|
TOTAL INTEREST INCOME (excluding dividends)
|
10,729
|
|
INTEREST EXPENSE
|
0
|
|
Deposits:
|
1,377
|
|
Demand (Retail)
|
2
|
|
Demand (Corporates)
|
672
|
|
Savings (Retail)
|
151
|
|
Savings (Corporates)
|
2
|
|
Time:
|
550
|
|
Certificates of deposits (Retail)
|
0
|
|
Certificates of deposits (Corporates)
|
0
|
|
Other
|
550
|
|
Interest paid to banks and financial institutions:
|
657
|
|
Loans
|
0
|
|
Foreign currency loans
|
0
|
|
Local currency loans
|
0
|
|
Deposits
|
657
|
|
Foreign currency deposits
|
28
|
|
Local currency deposits
|
629
|
|
Subordinated debt
|
18
|
|
Shareholders loans
|
0
|
|
All other
|
0
|
|
TOTAL INTEREST EXPENSE
|
2,051
|
|
NET INTEREST INCOME
|
8,677
|
|
PROVISION FOR LOAN LOSSES
|
0
|
|
General
|
(993)
|
|
Specific
|
139
|
|
TOTAL PROVISION FOR LOAN LOSSES
|
(855)
|
|
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
|
9,532
|
|
NON-INTEREST INCOME
|
0
|
|
Commissions, fees and service charges (local currency transactions)
|
3,065
|
|
Foreign exchange:
|
2,766
|
|
Fees from f/x transactions
|
622
|
|
Realised trading gains/ (losses)
|
3,343
|
|
Unrealised gains/ (losses) from foreign exchange holdings
|
(1,198)
|
|
Dividend income
|
0
|
|
All other
|
47
|
|
TOTAL NON-INTEREST INCOME
|
5,878
|
|
NET INTEREST AND OTHER INCOME
|
15,410
|
|
NON-INTEREST EXPENSES
|
0
|
|
Salaries and Employees Benefits
|
9,124
|
|
Occupancy
|
182
|
|
Equipment
|
248
|
|
Depreciation
|
60
|
|
Education and Training
|
17
|
|
Audit, Legal and Professional Fees
|
730
|
|
Insurance
|
58
|
|
Frauds and Forgeries
|
62
|
|
Management Fees
|
0
|
|
Donations
|
0
|
|
Others
|
2,357
|
|
TOTAL NON-INTEREST EXPENSES
|
12,838
|
|
INCOME /(LOSS) BEFORE TAXES
|
2,572
|
|
Taxation
|
1,039
|
|
INCOME/ (LOSS) AFTER TAXES
|
1,534
|
Nkumbu Bank Statement of Financial Position as at 31st December 2015
|
ASSETS
|
|
|
NOTES AND COIN
|
48,089
|
|
Domestic Currency
|
32,520
|
|
Notes
|
32,520
|
|
Coins
|
-
|
|
Foreign Currency Notes And Coins
|
15,569
|
|
BALANCES WITH BANK OF ZAMBIA
|
167,152
|
|
Statutory Reserves on Local Deposits
|
83,660
|
|
Statutory Reserves on Foreign Deposits
|
62,647
|
|
Current Account
|
20,846
|
|
Open Market Operations (OMO) Deposits
|
-
|
|
Other
|
-
|
|
BALANCES WITH DOMESTIC INSTITUTIONS
|
13,960
|
|
Banks
|
13,960
|
|
Other Financial Institutions
|
-
|
|
Items in Transit
|
-
|
|
BALANCES WITH FOREIGN INSTITUTIONS
|
243,679
|
|
Investments
|
170,556
|
|
Working Balances
|
73,122
|
|
INVESTMENTS IN SECURITIES
|
174,155
|
|
Issued or guaranteed by the Government
|
174,155
|
|
Treasury Bills
|
72,529
|
|
Government Bonds
|
88,426
|
|
Clearing house collateral (treasury Bills)
|
13,200
|
|
Statutory Bonds
|
-
|
|
Other Bonds
|
-
|
|
Other securities
|
-
|
|
NET LOANS AND ADVANCES
|
615,874
|
|
Gross Loans and Advances
|
624,471
|
|
Loans from Re-Finance Credit
|
-
|
|
Loans from Normal Deposits
|
624,471
|
|
Allowance for Loan Losses
|
8,598
|
|
BILLS OF EXCHANGE
|
-
|
|
INTERBRANCH
|
-
|
|
FIXED ASSETS
|
5,906
|
|
OTHER ASSETS
|
64,394
|
|
Accrued interest receivable
|
12,028
|
|
Derivatives
|
2,681
|
|
Prepaid and deferred charges
|
803
|
|
Goodwill and other intangibles
|
5,057
|
|
Taxes
|
-
|
|
Repurchase agreement receivable
|
-
|
|
Other
|
43,825
|
|
TOTAL ASSETS
|
1,333,209
|
|
-
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
-
|
|
DEPOSITS
|
1,032,715
|
|
Demand
|
639,800
|
|
Savings
|
94,068
|
|
Time
|
298,848
|
|
BALANCES DUE TO BANK OF ZAMBIA
|
-
|
|
Current Account
|
-
|
|
Open Market Operations (OMO) Loans
|
-
|
|
Re-financing credit
|
-
|
|
Other
|
-
|
|
BALANCES DUE TO DOMESTIC INSTITUTIONS
|
30,135
|
|
Banks
|
26,793
|
|
Other financial institutions
|
-
|
|
Items in transit
|
3,343
|
|
BALANCES DUE TO FOREIGN INSTITUTIONS
|
32,361
|
|
Loans and Advances
|
-
|
|
Others
|
32,361
|
|
BILLS OF EXCHANGE
|
-
|
|
INTERBRANCH
|
-
|
|
OTHER LIABILITIES
|
91,878
|
|
Accrued interest payable
|
6,098
|
|
Derivatives
|
-
|
|
Taxes
|
(3,100)
|
|
Deferred income
|
-
|
|
Dividends payable
|
321
|
|
Repurchase agreement payable
|
-
|
|
Other
|
88,559
|
|
OTHER BORROWED FUNDS
|
5,114
|
|
Maturing in less than one year
|
-
|
|
Maturing in one year or more
|
-
|
|
Subordinated debt
|
5,114
|
|
Shareholders' loans
|
-
|
|
Other
|
-
|
|
SHAREHOLDERS' EQUITY
|
141,006
|
|
Preferred shares
|
-
|
|
Ordinary shares
|
83,349
|
|
Share premium
|
-
|
|
Retained Earnings
|
55,472
|
|
Fair Value reserves
|
(3,734)
|
|
Revaluation reserves
|
-
|
|
Statutory reserves
|
2,457
|
|
Other Reserves
|
3,462
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
1,333,209
|
|
-
|
|
OFF BALANCE SHEET
|
106,110
|
|
Contingent Liabilities
|
72,899
|
|
Guarantees
|
53,673
|
|
Letters of Credit
|
19,226
|
|
Assets Pledged as Collateral Security (other than Clearing House)
|
-
|
|
Other
|
-
|
|
Commitments
|
33,211
|
|
Arising out of Sale and Option to Repurchase Transactions
|
-
|
|
Credit/Debit Cards
|
-
|
|
Foreign Exchange and Interest Rate related Contracts
|
2,426
|
|
Other
|
30,785
|
|
Allowance for Loan Losses on Acceptances and Off Balance
|
-
|
|
Sheet Items Included in Other Liabilities
|
-
|
REQUIRED:
(a) Calculate the Risk Weighted Assets (RWA) of Nkumbu Bank;
(b) Calculate the capital position of Nkumbu bank; and
(c) Determine whether the bank has adequate capital or is capital deficient.
Note: Use the Basel I framework.