Washington Mutual was a US Bank which went bankrupt at the end of 2008 due to a number of risk management issues. Explain credit risk from an individual and a loan portfolio management perspective and discuss how they relate to this case
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Washington Mutual was a US Bank which went bankrupt at the end of 2008 due to a number of risk management issues.
Explain credit risk from an individual and a loan
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- In most lending organisations, credit losses occur due to lack of credit risk monitoring. You’rerequired to identify a lending organisation of your choice (bank or retailer) and outline its periodicalcredit risk review process.The central bank intervened heavily in the credit crisis. Explain whether you believe the central bank’s intervention improved conditions in financial markets or made conditions worse.Washington Mutual, was a US Bank which went bankrupt at the end of 2008 due to a number of risk management issues. Read the case noted in the link below and answer the following questions: https://www.thebalancemoney.com/washington-mutual-how-wamu-went-bankrupt-3305620 a. Discuss in a paragraph format the importance of an internal risk assessment and auditing process in relation to this case.
- To what extent was the shadow banking system an important part of the 2007– 2009 financial crisis? - what is shadow banking - advantages and disadvantages of shadow banking - its role in the financial crisis - judgement and justification of the judgementWashington Mutual, was a US Bank which went bankrupt at the end of 2008 due to a number of risk management issues. Read the case noted in the link below and answer the following question: https://www.thebalancemoney.com/washington-mutual-how-wamu-went-bankrupt-3305620 Discuss the importance of an internal risk assessment and auditing process in relation to this case.Overdrafts are a result of a.loans made against certificates of deposit b.banks paying wire transfers made during one business day c.banks extending credit beyond the amount specified in a line of credit d.banks paying on checks or wire transfers drawn on uncollected balances. Loan participations are: a. parts of loans that are sold to banks b. participation in the underwriting c. parts of securitized investments d. downstream investment Convenience use of credit cards refers to a. the line of credit may be raised as needed b. amounts owed being paid in full when billed c. the open-end use of the card d. none of the above
- refers to the possibility that the debtors supported by bank credit are unable or unwilling to repay the debts on time as stipulated in the contract for various reasons, causing losses to the bank. (A) Credit risk (B) Market risk (C) Operational risk (D) Liquidity riskProblem 1 Does the lender of last resort function of central banks introduce moral hazard into the financial system? Explain. Briefly explain why central bank independence can be a solution to the time- inconsistency problem. What is shadow banking and what was its role in the financial crisis of 2007-2009?2. Substantial amount of credit losses is due to poor loan monitoring. In view of this, suggest how might one safeguard a bank's interest when providing loans.
- To minimize systemic risk in the banking system, which prudential measure has been put in place in the General Banking Law and the Manual of Regulations for Banks to safeguard them from too large a risk exposure to a particular borrower or corporate group?* Reserves Single Borrower's Limit DOSRI (directors, officers, stockholders and their related interests) Limit Equity Investment Limit Loan Loss provisioningSelect all that are true regarding credit risk for a bank. O This risk is an estimate of future uncollectibility that results in a provision expense on the bank's income statement. O Changes in the business cycle affect all firms the same, so credit risk is pro-cyclical. O Despite it's significance to banks, the housing market is a small part of the economy and has little effect elsewhere so there is no impact to credit risk. Material changes in the housing market impacts banks and their credit risk significantly due to the relative size of the mortgage portfollos. O Business cycles create variations in this risk, but affect each borrower differently.Moral hazard or its reduction explain the following except: O A. Collateral requirements for loans. O B. The Enron and Tyco scandals. O C. The success of zero commission trading. O D. Covenants requiring borrowers to provide information periodically.