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Financial Crisis and the National Economy

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Financial Crisis and the National Economy

Initial balance sheet Liabilities | £m | Assets | £m | Risk Weighting | Risk Adjusted Assets (£m) | Deposits | | Cash | | | | Current accounts | 195 | Cash in Tills | 5 | (0%) | 0 | Time deposits | 94 | Money at call | 5 | (0%) | 0 | | | | | | | Total Liabilities | 289 | Available for sale assets | | | | | Gove' Bonds & Bills | 10 | (10%) | 1 | | | Other Bonds & Bills | 40 | (20%) | 8 | Equity | | | | | | Shareholder Capital | 13 | Other assets | | | | Retained Profits | 3 | Loans and Advances | 125 | (100%) | 125 | | | Mortgages | 120 | (50%) | 60 | Total Equity | 16 | | | | | | | | | | | Total Liabilities + Equity | 305 | Total Assets | 305 | Total Risk Adj’ | 194 | UK Liquidity Ratio | 3.5% | Leverage Ratio | 5.2% | Capital Ratio | 8.2% |

Balance sheet after £6m write-down Liabilities | £m | Assets | £m | Risk Weighting | Risk Adjusted Assets (£m) | Deposits | | Cash | | | | Current accounts | 195 | Cash in Tills | 5 | (0%) | 0 | Time deposits | 94 | Money at call | 5 | (0%) | 0 | | | | | | | Total Liabilities | 289 | Available for sale assets | | | | | Gove' Bonds & Bills | 10 | (10%) | 1 | | | Other Bonds & Bills | 40 | (20%) | 8 | Equity | | | | | | Shareholder Capital | 7 | Other assets | | | | Retained Profits | 3 | Loans and Advances | 125 | (100%) | 125 | | | Mortgages | 114 | (50%) | 57 | Total Equity | 10 | | | | | | | | | | | Total Liabilities + Equity | 299 | Total Assets | 299 | Total Risk Adj’ | 191 | UK Liquidity Ratio | 3.3% | Leverage Ratio | 3.3% | Capital Ratio | 5.2% |

The ‘risk adjusted assets’ are worked out by multiplying the monetary amount of each asset by the risk…...

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