a) Identify and show the key components of a bank’s balance sheet.
b) How is a bank’s leverage ratio computed? What does it describe?
c) Using an example level of a leverage ratio, explain how large a shock a bank can sustain before it is insolvent.
d) What is a capital control and why are they used?
e) What is the difference between bank insolvency and illiquidity?
f) What re the two types of risk faced in the financial system? Explain each.