Lectures

Question 1

Cost /income ratio

Answer 1

(personal expenses + general expenses incl. dep) / operating income

Question 2

Pre Tax margin

Answer 2

Pre tax income/operating income

Question 3

Compensation revenue ratio

Answer 3

Personal exp / operating income

Question 4

ROA

Answer 4

Profit/ Average assets

Question 5

Net interest margin

Answer 5

Net interest income / average assets

Question 6

Gross margin in bp

Answer 6

operating income / average assets under management

Question 7

EPS

Answer 7

profit attributable to shareholder/ average number of shares

Question 8

ROE

Answer 8

Profit/ average equity

Question 9

Economic profit

Answer 9

Adjs. Profit - cost of capital

Question 10

Rev/cost/headcount growth

Answer 10

(V1-V0)/V0

Question 11

New asset growth

Answer 11

net new assets/ Assets under management at time 0

Question 12

Financial business volume

Answer 12

Client assets + credit volume

Question 13

Market share & league tables

Answer 13

Business volume of bank / total volume of market

Question 14

Different risks

Answer 14

Market risk, Credit risk, Loss & Operational risk and Loss absorption capacity

Question 15

Market Risk measurements

Answer 15

Value at Risk, interest risk

Question 16

Credit risk & Operational risk measurements

Answer 16

Risk weighted assets, expected losses, economic capital

Question 17

Common Equity Tier 1 Ratio

Answer 17

Common Equity Tier 1 (CET1) / risk weighted assets

Question 18

Leverage ratio

Answer 18

Equity/assets

Question 19

P/E

Answer 19

Share price / earnings per share

Question 20

P/B

Answer 20

Share price / book equity per share

Question 21

Shareholder return

Answer 21

(P1-P0+D)/P0

Question 22

Client assets

Answer 22

All deposits accounts, safekeeping accounts

Question 23

Assets under management (AuM)

Answer 23

Client assets with investment purposes

Question 24

Assets under Custody

Answer 24

Third party manages the assets

Question 25

Compunded Annual growth rate (CAGR)

Answer 25

(Vn/V0)^(1/N) -1

Question 26

3 Valuations for Assets

Answer 26

Nominal value Cash & cash equivalents, due from banks and customers, mortage loans Fair Value Trading portfolio, positive replacement values of derivatives Amortized cost Reserve repurchase, debt instruments

Question 27

3 Valuations of liabilites

Answer 27

Nominal value: Due to bank, customer deposits Fari value: Trading portfolio liabilities Amortized cost Repurchase agreement

Question 28

Bank Management Definition

Answer 28

Informal and formal steering mechanisms for coordination of various decisions How to produce relevant information

Question 29

Steering system definition

Answer 29

Interacting components forming intergrated whole with purpose measurement --> comparison --> action --> measurement osv.....

Question 30

Goal of steering systems

Answer 30

Goal is to influence behavior and decisions at different levels

Question 31

Steering systems example

Answer 31

Center steering & cost accounting Steering with KPI:s (culutre, profit) Balanced scorecard Sale performance measure

Question 32

Why steering systems and not seperate decisions?

Answer 32

- Assurance of quality decisions - Raising decision speed - More rationality - Consistency over goals

Question 33

Challanges facing Banking Management

Answer 33

- Combination of goals (profitability, safety, liquidity) - Interaction of centralized and decentralized decision - Complexity of services and processes

Question 34

Credit Risk Definition

Answer 34

Risk arising of non payment installments due to borrower no being able to pay

Question 35

Is credit risk a big risk?

Answer 35

Yes, the biggest risk run by banking institutions Big part of business (lending and borrowing)

Question 36

4 different parts of credit risks

Answer 36

Default risk Creditworthiness Issuer/borrower risk Counterparty risk

Question 37

How can credit risk be measured?

Answer 37

Regulatory framewrk - Basel 1 Ratings from agencies Credit spread

Question 38

Credit default swap

Answer 38

a contract between two parties in which one party purchases protection from another party against losses from the default of a borrower for a defined period of time.

Question 39

Market risk definition

Answer 39

Losses on adn off balance sheet from movement in market prices

Question 40

DVO1

Answer 40

Hur PV ändras med en bp change i interest rate

Question 41

Value at Risk (VaR)

Answer 41

Tries to capture unexpected change in value in a functioning market Worst possible loss in a normal market

Question 42

Operational risk definition

Answer 42

Risk, direct or indirect loss from failed internal processes & systems

Question 43

3 issues with operational risks

Answer 43

Measurement: hard to measure Management: how can it be controlled Mitigation: can you transfer it?

Question 44

How to identify operational risk

Answer 44

Common language Define; people risks, process risks and tech risks osv Form in-house of experts Loss data collection

Question 45

3 Methods basel 2 / operational risk

Answer 45

BIA= average gross income * 0,15 TSA = average cap requirement AMA = Advanced measurment approach

Question 46

Basel 1,2 &3 områden

Answer 46

Basel 1: Minimum capital requirements Basel 2: Supervisory review purposes Basel 3 : Market discipline

Question 47

Goal of Basel 1

Answer 47

So that banks have a capital amount to bring stability to industry

Question 48

Basel 2 calculations for market risk

Answer 48

Standard approach: DVO1 Internal Model Approach: Var and expected shortfall

Question 49

Basel 2 calculations for credit risk

Answer 49

Credit risk = exposure * default prob *(1- recovery rate)

Question 50

Basel 2 calculations for operational risk

Answer 50

TSA BIA AMA