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ABC Bank’s officials consider compliance with regulatory requirements as an absolute necessity to the survival of their company. ABC Bank’s management team understands how banks impact the economy in general, especially the implications of poorly-managed risk within the banks. ABC’s leadership team believes that a holistic understanding of the intricacies of risk management within banks as well as the impact of risk on the economy is necessary to drive the desired behavior. As a result, you have been hired to facilitate a presentation for ABC’s new hires. Your presentation should be composed in PowerPoint or Prezi and must be submitted to ABC’s HR department for approval by the end of the week. You must submit your slides and notes about what you plan to say in the presentation. Notes can be submitted by using the Note feature located at the bottom left of the PowerPoint slide. Your presentation and notes should include the following: 8 slides Identify three ways that banks impact the economy. Please include clear and defined examples. Name two banking regulations, and explain their role and origin. As a result, what risk management practices did banks adopt? The consequences for failing to comply with the regulatory standards are: If they were not regulated, would it be prudent for a company to manage their leverage and liquidity? Why? What are the tools that organizations can use to mitigate risks associated with inadequate levels? APA 2 references 1. The three ways in which banks impact the economy, with clear examples and well-defined explanations, are discussed. 2. The two applicable regulations have been identified and their origins and roles in the management of risks by banks correctly and with high levels of detail. 3. The appropriate standards for risk management that resulted from each of the regulations are described and listed. 4. The consequences of failing to comply with the regulatory standards are described in detail. 5. You will be asked to provide a response that includes specific examples, as well as a rationale for why the firm might or might not manage their level of liquidity and leverage if they were unregulated. 6. Included are the appropriate tools to manage each of the risks associated with leverage, liquidity and debt.
Presentation Title: Risk Management: An Important Issue for Banks
- Introduction to the subject and its importance for the banking industry
- Mention how banks affect the economy
Slide 2: Banks and the economy Title: Three ways banks impact the economy
- How banks influence the economy
- Providing financial intermediation
- Credit and Liquidity
- Economic growth and job creation
- Examples and reasons clearly defined for each impact
The Regulations of Risk Management
- The two main regulations for managing risk within the banking sector:
- Basel I, Basel II and Basel III
- Dodd-Frank Act
- Each regulation and its role in managing bank risks
Basel Accords and Risk Management Standards
- Basel Accords: Description and objectives
- Basel Accords have resulted in risk management standards.
- Capital ratio
- Liquidity Coverage Rat
- Leverage ratio
- Explain each standard of risk management
Dodd-Frank Act Slide Title: Dodd-Frank Act & Risk Management Standards
- Dodd-Frank Act: Description and objectives
- Dodd-Frank Act has resulted in new risk management standards:
- Stress Tests
- Resolution plans
- Explain each standard of risk management
Consequences for non-compliance
- Explain the consequences of not meeting regulatory standards
- Non-compliance with banking regulations can have a negative impact on the economy and banks.
Slide 7: Risk Management with Prudence Title: The importance of prudent risk management
- Discuss the importance of controlling leverage and liquid levels
- Explain why an organization would want or not wish to control its leverage and liquidity levels if they were not regulated
- Example and proper reasoning
Slide 8: Tools for Risk Management Title: Tools for Managing Risks
- Tools for managing the risks of leverage and liquidity
- Identifying the appropriate tool for each type of risk
- The importance of using these tools
References:
- Basel Committee on Banking Supervision. (2019). Basel III: international framework for measurement, standardization and monitoring of liquidity risks. Bank for International Settlements.
- Dodd-Frank Wall Street Reform and Consumer Protection Act (pub. L. No. 111-203, 124 Stat. 1376 (2010).