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.
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102.798406TMAC
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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.
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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.
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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.
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