Question

You have been hired as a financial regulator of Liberty Bank Limited, a leading bank in United States
as it holds third largest amount of deposits. Your task is to ensure that the bank generates
reasonable profits and manage risk of such huge deposits. Develop an action plan to safeguard
bank’s operations and its depositor’s money?

Answer 1

If I am the financial regulator in Liberty Bank, My action plan to safeguard the bank operation and depositors money would be as follows-

A. Lending of the money to the the creditworthy borrowers so that there would be better asset quality available in the bank and there would be a lesser cases of default being reported by the bank.

B. Selling of the bad Assets and recovering the money from them in order to realise the cash and have more lending power and it will be helpful in order to sell these assets to the Asset restructure companies and remove the non performing assets from the books of the accounts.

C. Insuring a reasonable stream of net interest income that will be helpful in order to generate enough liquidity into the bank and it will be helpful in generation of solvency in the bank as well.

D. I will be looking to implement the policy of matching the assets with the liabilities in order to have a better repayment ability of deposits and it will also be helpful in managing of gap of various deposits.

E. To not have exposure into very risky securities and not lend to the risky borrowers because they are highly exposed to the adversity in the economic cycle so I would be very much cautioned against lending to all these borrowers who have a risk of defaulting.

F. Better management of the human resources in the bank in order to have an appropriate balance in in matching of the employees goals with the company's goals.

G. following up with codes of ethics & regulation and appropriate public disclosure in order to report the profits in line and there should not be any intended fraud by the bank.