Bank

2016 ZA
(a) Distinguish between liquidity and solvency in relation to a bank.
Explain how a bank
could become insolvent and explain the role of capital and liquidity
in preventing insolvency.
(10 marks)

(b) Critically evaluate the methods a bank can use to manage the
credit risk it faces.

(a) Discuss the main reasons for regulating banks and examine the
safety net arrangements put in place in most banking systems.
(15 marks)

(b) Distinguish between micro-and macro-prudential regulation and

give examples of how macro-prudential regulation might work in
practice. (10 marks)

ZB
a) Outline the key features and implications of the Diamond model
of banks as delegated monitors. (15 marks)

(b) Explain how transaction costs and asymmetric information in

credit markets has changed in the last 20 years and assess the
impact of these changes on financial disintermediation.(10 marks)

Distinguish between liquidity and solvency in relation to a bank.

Explain how a bank could become illiquid and how attempts to
rectify this situation by the bank could lead it to become
insolvent.(10 marks)

(b) Critically evaluate the methods a bank can use to manage the
liquidity risk it faces.(15 marks)
Discuss the causes, consequences and solutions of the too big to
fail problem in banking.
(15 marks)

(b) Distinguish between micro-and macro-prudential regulation and

give examples of how macro-prudential regulation might work in
practice

2015 ZA
a) Explain free (unregulated) banking and discuss the advantages
and disadvantages in relation to the stability of the banking
system
b) Discuss the moral hazard problems caused by the provision of
safety net arrangements for banks and examine solutions.
ZB
a) Discuss the advantages and disadvantage of the prudential
regulation of banks and discuss the problems created by the
excessive regulation
ZB

(a) Discuss the risks arising from both the banking book
(intermediation business) and trading book of banks. (8 marks)
(b) Examine how Value at Risk models can be used by a bank to
manage its market risk exposure. Discuss the problems with these
models. (10 marks)
(c) Explain how interest rate risk can affect a bank. (7 marks)
4. (a) Discuss the role of market discipline in regulating banks.
(6marks)
(b) Discuss the reasons for the lender of last resort facility provided
by central banks and discuss the problems with the provision of this
facility. (7 marks)
(c) Discuss the reasons for the proposed changes in capital regulation
under Basel 3. (12 marks)

Financial intermediation
16 ZA
(a)
Examine the respective roles of transaction costs and asymmetric
information in accounting for intermediation through financial
institutions.(15 marks)

(b)
Explain how transaction costs and asymmetric information in credit
markets has changed in the last 20 years and assess the impact of
these changes on financial disintermediation.
(10 marks)

ZB
(a)
Outline the key features and implications of the Diamond model of
banks as delegated monitors. (15 marks)

(b)
Explain how transaction costs and asymmetric information in credit
markets has changed in the last 20 years and assess the impact of
these changes on financial disintermediation

15ZA
 a) Discuss the role of conflicting requirements of lenders and
borrowers and transaction costs in explaining financial
intermediation.
b) Examine the role of delegated monitoring (diamond model) in
explaining financial intermediation

ZB
a) Asymmmentr info in explaning FI
b) Liquity insurance provision (diamond and dybvig) FI

14 ZA
(a) Discuss how asymmetric information can cause problems in
debt markets. (12 marks)
(b) Examine the solutions aimed at reducing adverse selection in
debt markets. (13 marks)

a) Explain how financial intermediation exposes banks to risk and

explain what those risks are. (8 marks)
(b) Examine the main solutions a bank can adopt to manage credit
risk. (10 marks)
(c) Distinguish between re-financing and re-investment risk as faced
by banks. Give examples of each of these risks. (7 marks)

ZB
http://www.double-entry-bookkeeping.com/accounts-
receivable/trade-discount/
http://www.principlesofaccounting.com/illustrative%20entries/illust
rative%20entry%20for%20freight-out%20and%20-in.htm
http://thevistaacademy.com/what-is-carriage-inwards-and-journal-
entry/
http://www.accounting-basics-for-students.com/-accounting-
treatment-for-carriage-inward-.html
http://www.double-entry-bookkeeping.com/cogs/ending-inventory/
http://www.double-entry-bookkeeping.com/inventory/sale-of-
inventory/
http://accounting-simplified.com/discount-allowed.html
http://accounting-simplified.com/discount-received.html
http://www.double-entry-bookkeeping.com/accounts-
receivable/cash-discount/
http://www.double-entry-bookkeeping.com/accounts-payable/cash-
discount-received/