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QUESTION 3. Consider the following summarised balance sheet of Barclays Bank: ...

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Finance

QUESTION 3.

Consider the following summarised balance sheet of Barclays Bank:

Assets

Amount

Rate

Liabilities and Equity

Amount

Rate

Rate sensitive

6,000

7%

Rate sensitive

7,000

3%

Fixed rate

4,500

10%

Fixed rate

3,200

5%

Non-earning

2,500

Non-paying liabilities and equity

2,800

Total

13,000

Total

13,000

Unit: Thousand GBP.

  1. Provide detailed definitions of rate-sensitive assets and rate-sensitive liabilities in GAP analysis.

[4 marks]

  1. Discuss the weaknesses of GAP analysis.

[4 marks]

  1. Calculate the banks GAP.

[2 marks]

  1. Calculate the banks Net Interest Income.

[2 marks]

  1. Calculate the banks Net Interest Margin.

[2 marks]

  1. Calculate the change in Net Interest Income and Net Interest Margin if there is a parallel shift in the yield curve of 1 percentage point higher during the year. Comment on your findings using the data and the implications of GAP analysis.

[11 marks]

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