This is the ratio of the bank’s non-performing loans to its total loans. A high NPL ratio #indicates higher credit risk and #potential loan losses.
Let’s say a bank has a $1-billion loan portfolio. Because the #borrowers have missed #payments for more than 90 days, $100 million (or 10%) of these are classified as non-performing loans.
If the bank has to set aside a #provision of 50% for these non-#performing loans, it would need to allocate $50 million toward provisions. This means that the bank’s net loan portfolio would be $950 million.
Let’s now #imagine that the bank must write off these non-#performing loans because it will not be able to recover $20 million from them.
As a result, the bank’s loan #portfolio would drop to $930 million, which would have an #effect on the bank’s profitability and capital adequacy ratios.
This example #illustrates how non-performing loans can have #significant implications for a bank’s financial position, and why it is crucial for banks to manage their loan portfolios effectively to minimize the risk of such loans.
This is the ratio of a bank’s #operating costs to its operating income. A lower ratio #indicates higher efficiency and profitability.
For example, let’s say a bank has total #operating expenses of $500 #million and a total operating income of $1 billion. The cost-to-income ratio for this bank would be:
This means that the #bank spends $0.50 on operating costs for every dollar of #operational income it generates.
In #general, a lower cost-to-income ratio is preferable since it shows that the bank is more #profitable and efficient because it can generate more income with fewer expenses.
This is the ratio of a bank’s loan loss #provisions to its non-#performing loans. It reflects the bank’s ability to cover potential loan losses with its provisions.
For example, let’s say a bank has loan loss #provisions of $100 million and #nonperforming loans of $50 million. The loan loss provisions coverage ratio for this bank would be:
The capital #adequacy ratio assesses a bank’s ability to pay #liabilities and handle credit and operational risks.
A good CAR #indicates that a bank has enough capital to absorb losses and avoid insolvency, #protecting depositors’ funds.
The Bank of #International Settlements separates capital into Tier 1 and Tier 2, with Tier 1 being the primary #measure of financial health, including shareholder equity and retained earnings.
Tier 2 is #supplementary capital, including revalued and #undisclosed reserves and hybrid securities.
The risk #weighting determines the sum of the #bank’s assets and varies for each asset class, such as cash, debentures and bonds.
In this case, the bank’s CAR is 15%, which #indicates that it has sufficient #capital to cover its potential losses from its lending and investment activities.
#Decentralized finance (DeFi) enables #financial systems that are transparent, secure and accessible to all.
introduced the world to #decentralized currency and challenged the #centralized banking system.
The GFC and the collapse of SVB #highlighted the risks of #centralized financial systems, leading to an increased interest in the decentralization of banking.
#Custodia has applied to be overseen by U.S. #regulators but has been repeatedly passed over.
#NBC #Reporter #Ben #Collins highlighted the fact that an account linked to #California #Congresswoman #Grace #Napolitano got totally overrun by #crypto scam bots.
However, a more #energy-efficient update for the world’s favorite #cryptocurrency is still needed.
The next #G7 meeting might bring a push from the seven biggest democracies for tougher regulations on #cryptocurrencies around the world, #Kyoto news agency reports on March 25.
as well as address potential risks to the global financial system, officials told #Kyoto. This year's summit is set to happen in #Hiroshima, in May.
Parallel efforts towards standards for #digital #assets are being made by the #Financial #Stability #Board (#FSB), the International Monetary Fund (#IMF),
Recommendations on the regulation, supervision and oversight of #global #stablecoins, #crypto assets activities and markets are scheduled to be delivered by July and September. It is unclear, however, what the overall tone of the recommendations will be.
Live the Life of Your Dreams: Be brave enough to live the life of your dreams according to your vision and purpose instead of the expectations and opinions of others. #life #motivation