Calculate risk weighted assets of nkumbu bank

Assignment Help Financial Management

Reference no: EM131222325

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

Note: Use the Basel I framework.

Reference no: EM131222325

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