Page 209 - 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

(c)(i) Element of bank’s balance to be affected

- Most banks set aside a litigation reserve for any
occurrences such as these.

- In such an instance, assets would be affected and reduced
by the amount or fine- $200 million.

- Some stakeholders may perceive this as a risk. If the
company is public the Equity will be affected through a
reduction in capital because of sale of the company’s
stocks.

- There can also be withdrawals of deposits which would also
affect the liabilities side (and asset side through
required reserves and excess reserves), more specifically
deposits.

- Equity can also be affected-through retained earnings. If
no litigation reserve is in place.

If only one element of the balance sheet is stated as being
affected 1 mark.

A brief explanation of how this element is affected should
be awarded 4 marks.

For example, if the candidate states that assets will be
affected, award 1 mark. The above explanations are not the
only possibilities.