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FINS2618-Capital Markets & Institution - T2 2025

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Preston Bank, an Australian bank, currently has a CET1

ratio significantly below APRA’s required 10.25%. The bank anticipates

$305 billion in risk-weighted assets in the coming years. Considering the

challenges under Basel III, which of the following would be the most effective

action to help Preston Bank meet its capital adequacy requirement?

33%
0%
0%
67%
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The following assets were

recorded on the balance sheet for HarperBank at the end of this financial year:  

Asset Type

Asset Value ($million)

Risk Weighting (%)

Cash and Reserve Bank deposits

6,000

0%

Loans to Australian government entities

9,000

20%

Residential mortgages

18,000

50%

Corporate loans and commercial property loans

22,000

100%

 

If the required Common

Equity Tier 1 (CET1) capital ratio is

10.25%

, how much CET1 capital (in

$ million) does HarperBank need to hold?

(Instructions:

Enter numbers only (no $ sign). Round your answers to two decimal places.)

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Read the following scenarios and identify which involve

systematic risk (market-wide risk) and which involve unsystematic risk

(company- or industry-specific risk):

I. A sharp rise in interest rates by the Reserve Bank causes a

broad decline in the stock market.

II. A fire damages a major manufacturing facility owned by a listed electronics

company.

III. Global oil prices surge due to geopolitical tensions in the Middle East,

impacting energy and transport stocks.

IV. Tesla is boycotted, resulting in an 81% year-on-year drop in sales and a

sharp selloff in its stock.

V. A trade war between the US and other countries causes widespread disruption

in global supply chains.

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Match each statement below to the most appropriate concept:

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Why might a fund manager employ both a technical

analyst and a fundamental analyst, even though the two approaches are often

viewed as conflicting?

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Rose Co announced a renounceable rights issue to existing shareholders. The pro-rata offer is made on a 2-for-9 basis at an offer price of $32.75 per share. The current market price of Rose Co’s ordinary shares is $34.86.

What are the correct answers to the following?

(i) Cum-rights share price

(ii) Value of one right

(iii) Theoretical ex-rights price

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In the first half of 2025, HarperBank reported total 30-day net cash outflows of $15,000 million under stressed conditions and a Liquidity Coverage Ratio (LCR) of 120%.

For the upcoming quarter, the bank expects these net cash outflows to increase by 20% and aims to raise its LCR to 130% to strengthen its liquidity buffer.

How much additional High-Quality Liquid Assets (HQLA) does HarperBank need to hold to meet this new target?

Instructions:

Enter numbers only (no $ sign). Round your answers to two decimal places.

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Please match the following bank activities to their

respective Pillar according to the Basel II capital accord framework:

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Why is it generally inappropriate to compare

debt-to-equity or interest coverage of companies from different industry

classifications?

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Which of the following

statements is correct?

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