Question

You are currently in charge of granting charters to new commercial banks. Mr. McCelland wants to open a new commercial bank in the city of Pittsburgh. He will invest $300 million as equity (net worth) and will be the only owner. In his application for a charter, he states that he plans to lend money (say 95% of its total loans) to small apparel retailer who operates in the city of Pittsburgh.

QUESTION: Would you grant a charter to Mr. McMelland? Yes or No? and WHY??? Provide at least 2 reasons to support position. use less than 4 lines.

Answer 1

A charter for the bank is largely a license to start its operations of taking deposits and loaning cash as loans. No. i might not grant a charter to adult male. McMelland for beginning his bank's operations as a result of
1 - The structure structure of one owner isn't the least bit appropriate for any bank to control with profit and feasibleness. Banking operations square measure vast and have plenty of responsibilities and selections to be taken that need group action. thence the choice of one owner isn't spare for handling bank operations.
2 - The set up of adult male. McMelland to lend most (95%) of his cash to little attire retailers doesn't appear correct as you would like a lot of varied disbursement of your season cash to avoid the danger of default. IF the market conditions worsen for little attire retailers it might mean that the majority of adult male. McMelland's invested with cash is blocked within the risk of defaults.