Answer – Matching Liquidity Ratios of Banks

This is the answer for Quiz – Matching Liquidity Ratios of Banks.

Liquid Assets* / Total AssetsLoans / DepositsCustomer Deposits / Total AssetsBank
A57%N/AN/AGoldman Sachs
B16%70%84%Bank of India
C20%84%77%Wells Fargo
E61%30%63%Rothschild Bank

A Investment bank

  • High levels of liquid assets, due to trading activities
  • No loans and very limited deposits due to limited commercial banking operations

B Emerging market bank

  • Dominant position in deposit-taking market
  • typical conservative loan/deposit ratio
  • Typical liquid asset ratio

C US retail bank

  • Aggressive lending policies in US market (credit cards, mortgages etc.)
  • Strong customer deposit base due to nature of business and high rating
  • Very limited trading activities
  • Liquidity maintained only to meet prudent management and regulations

D Spanish commercial bank

  • Reasonable level of liquidity
  • High loan/deposit ratio due to presence of Caja’s dominance in retail deposits and resources to wholesale funding

E Swiss private bank, with business focussed on high net worth individuals

  • Focus on true liquidity as opposed to trading activities
  • Low level of loans due to client base (high net worth individuals have no need for loans)
  • Relatively strong deposit base from rich depositors in Switzerland (seen as safe haven)

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