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8/3/2019 Lect 2-Financial Statement
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Lecture 2
8/3/2019 Lect 2-Financial Statement
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Balance Sheet41. Financial statements to be submitted to Bank.
LiabilitiesDeposits
25. Receiving, taking or acceptance ofdeposits prohibited except under and inaccordance with a valid licence granted
under section 6 (4).34. Deposits to be subject to specified
minimum or maximum period, minimumor maximum amount, and otherspecified terms and conditions.
Equity
37. Maintenance of capital funds.
AssetCash
38. Maintenance of liquid assets
36. Maintenance of reserve fund.
Loans
60. Grant of secured and unsecuredcredit facilities.
61. Restriction of credit to singlecustomer.
62. Prohibition of credit facilities todirector and officer.
63. Restriction on giving of creditfacilities.
Investment
66. Restrictions on investments.
Other Assets
39. Maintenance of assets in Malaysia
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Why have a Balance Sheet?
To extract information for
Crisis prevention
Identify risk faced
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Economic Contraction
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1997 = 1200
1997 = 1200July 1998 = 250+
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Financial Crisis
Expectations at the time were that thegrowth rate would continue, propellingMalaysia to a Developed Country statusby 2020, a government policy articulated
in Wawasan 2020.
At the start of 1997:
the KLSE Composite index was above 1,200,
the ringgitRinggit 2.50 to the dollar,
Overnight rate was below 7%.
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(b) Crisis Identification
Types of risk
Maturity mismatch risk
Maturity mismatch risk arises typically when
assets are long term and liabilities are shortterm.
Maturity mismatches create rollover risk :
maturing debts will not be refinanced,
debtor will have to pay the obligation in cash.
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Credit Risk
Non Performing Loans
3 months vs 6 months
interest and principle
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Commercial Bank
Finance Company
Merchant Bank
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ExampleNon-Performing Loans
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Examples of Bank’s Financial
Statement
Refer to Hong Public Bank
BerhadBalance Sheet
Income Statement
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Balance SheetBalance Sheet
Refer to Public Bank BhdObserve the asset composition(uses of fund)
Observe the liabilities ( sources offund)
Observe the capital structures
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Assingment
Based on the example of PBB AnnualReport, state the purpose of the balancesheet and the income statement
Identify the key features of the financialstatements of banks.
Identify the differences between itemsreported in the financial statement of
Hong Leong Islamic Bank and PBB(conventional bank)
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Takeaways
o
Importance of abank’s financial
statement
oBank vs non-bankfinancial statement
o Items reported in the
financial statement
oReasons for bank
regulation
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Thank You
