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Bank Treasury Essay

1229 words - 5 pages

There was a general increase in the Bank’s portfolio of both assets and liabilities for the year ending December 31, 2010 when compared to the previous comparative period. This was mainly attributed to increases in the Bank’s loans and advances, investment securities and customer deposits.
Assets for the year ending December 31, 2010 increased by $240,359 (29.22%) when compared to the previous year and this was primarily due to increases in Loans and Advance and Investment Securities which were $127,732 (29.41%) and $101,654 (39.97%) respectively. Although there was an increase in the Loans and Advance figure, General Loan Loss Reserve also increased by $1,261 (63.40%). Included in the ...view middle of the document...

The Central Bank of Trinidad & Tobago requires each financial institution to:-
• Maintain a ratio of total capital to risk adjusted assets of not less than the minimum standard of 8%.
• Core capital must not be less than fifty percent (50%) of total capital i.e. supplementary capital must not exceed core capital.
The Bank’s regulatory capital is managed by:
• Tier 1 (Core) Capital: - share capital, retained earnings and reserves created by appropriations of retained earnings.
• Tier 2 (Supplementary) Capital – qualifying subordinated loan capital, general loan loss reserve, impairment allowances and unrealised gains arising on the fair valuation of equity instruments.
2010 2009
$’000 $’000
Tier 1 (Core) Capital
Share capital 140,523 120,708
Statutory reserve 6,950 5,467
Retained earnings 18,200 14,400
Total Tier 1 Capital 165,673 140,575
Tier 2 (Supplementary) Capital
General Loan Loss Reserve 3,250 1,989
Total Tier 2 Capital 3,250 1,989_

Total Capital 168,923 142,564

Risk adjusted assets (RAA) 661,200 511,137
Total capital to RAA 25.55% 27.89%
Core capital to RAA 25.06% 27.50%

Based on the above, Bank T & T Limited has adequately provided for their capital requirements so as to ensure the continued operations of the organization. The capital adequacy ratio measures the amount of a bank’s capital in relation to the amount of its risk weighted credit exposures.
The Total capital to RAA, although decreased between 2010 and 2009, is way above the minimum and current reserve requirement and the Bank may be foregoing other investments opportunities by holding such a high capital position This is quite likely the main reason they are attempting to fund new asset growth and change the Asset and Liability Committee (ALCO). This also contributes to the assumption that Bank T & T Limited appears to be a risk adverse institution. Core capital is way above the obligatory 50% however there has been a decrease from 27.50% in 2009 to 25.06% in 2010. This position is still way within the required margin but ALCO should continue to monitor this on an ongoing basis.
Scenario 3 – March 9th, 2011
The Central Bank has just advised of that they will be floating a new 20 year bond (GOTT 2031 Fixed Rate, Coupon 6.25%) for the completion of the Solomon Hochoy highway extension project. Total issue size is TTD1 billion.
The Bank’s investment portfolio as at December 31, 2010 includes a 20 year gov’t fixed rate bond, coupon 5.875%...

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