Page 208 - CAPE Financial Services Syllabus Macmillan_Neat
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02269020/CAPE/KMS 2016 SPEC
FINANCIAL SERVICES STUDIES
UNIT 2 - PAPER 02
KEY AND MARK SCHEME
6. (a) Extract of bank’s balance sheet
Assets Liabilities
Millions $ Millions $
(1) Loans 165 Capital 25 (1)
(1)
Required
(2) Reserves 30 Deposits 300
Excess
(1) Reserves 130
325 325
(b) Capital Adequacy ratio
= (1)
$25 = 7.69% (1)
$325
Source Bank’s capital adequacy is below the required amount.
This suggests that the Bank may face solvency risk if their
capital adequacy ratio does not improve. (2)
2 marks for computing ratio
2 marks for explaining findings
