5.2 Trustworthy privacy-preserving announcements in VANETs
5.2.7 Simulation
30789 26788 34420 43486
2006 2007 2008 2009 2010 2011
F . L oans A . L oans
From this graph I find that by increasing 1 year the company Loans is increasing day by day.
During the year 2009 there is a positive growth of the loans and advances. This betterment in loans and advances was the result of strategic plan. So overall the deposit growth rate shows a satisfactory performance of the company.
5.3.f) Ratio Analysis (Liquidity Ratios):
In balance sheet measures, we can express ratio between certain assets and liabilities, can have many useful applications for a bank. Many banks use ratios in addition to detailed cash flow projections as a tool for high level planning and for formulating simple operating rules. External analysts, regulatory agencies and investors find them practical, because a ratio can give a quick indication of the overall liquidity position. Ratios make it easy to compare liquidity between different institutions or to calculate average liquidity for an entire sector of the financial industry.
Ratios are also popular because of their limited data pre-requisites.
It takes systematic planning and inputs from all parts of the banking organization to draw up a credible cash-flow chart, but all you need to calculate a ratio is the last balance sheet. However, the real information value of a ratio lies not in its absolute number at a certain balance sheet date.
Rather than looking at such a single snapshot, management should be concerned with the trends of the ratios over time. While ratios can seldom provide answers about changes in the bank's liquidity or operational efficiency, marked trends in their development can point to questions that merit further investigation.
6.5
Current Ratio:Probably the best-known liquidity ratio is the Current Ratio, the quotient of current assets and current liabilities. Current assets and current liabilities are commonly defined as falling due within a year from the balance sheet date.
LIQUIDITY M N GEMENT OF CBL
Current Ratio = (Current assets / Current liabilities)
Year Ratios
2006 1.318364
2007 1.102125
2008 1.17803
2009 1.311393
1.318364
1.102125 1.17803
1.311393
0.8 1 1.2 1.4
2006 2007 2008 2009
C R
One of the most important issues in liquidity management is to determine which proportion of the assets should be held as a liquidity reserve and how much can be loaned out. The current ratio is of no help in this regard. In fact, an institution that has loaned all its funds and has zero liquidity would have the same current ratio as a bank that has not made a single loan and holds all its current assets as vault cash. Despite its limited information value, a bank might still need to track and publish the current ratio, simply because it is used so widely by donors and propagated in many comparative studies of the banking sector.
From this above graph we see that in 2006, current ratio was highest but after that year it reduced and in 2008, 2009 it increased.
2
. Cash Position Indicator:The cash position indicator compares vault cash and demand deposits at other banks including the central bank to the total asset base of the institution:
Cash Position Indicator = (Cash and deposits due from banks/Total assets)
Year Ratios
2006 0.9212
2007 0.9028
2008 0.843121
2009 0.883085
LIQUIDITY M N GEMENT OF CBL
0.9212 0.9028
0.843121 0.883085 0.8
0.85 0.9 0.95
2006 2007 2008 2009
C P I
C P I
This ratio obviously ranges between 0 and 1, where a larger proportion of cash implies that the institution is in a stronger position to handle immediate cash needs.
The City Bank Limited was stronger in 2006 but that time it reduced to 2008 and in 2009 it increased.
3. Capacity Ratio:
The mirror image to the cash position is captured by the capacity ratio, which should be understood as a negative liquidity indicator:
Capacity Ratio = (loans/ Total assets)
Year Ratios
2006 0.648927
2007 0.549441
2008 0.602654
2009 0.568697
LIQUIDITY M N GEMENT OF CBL
0.648927
0.549441 0.602654
0.568697
0.45 0.5 0.55 0.6 0.65
2006 2007 2008 2009
C R
C R
The higher the capacity ratio, the lower the institution's liquidity. Even at zero liquidity, the capacity ratio will be less than 1, because of the necessary investment in fixed assets.
In 2007 city bank had highest liquidity position and in 2006 it was lowest liquidity position.
4. Total Deposit Ratio:
A large base of retail deposits would be evidenced by a high total deposit ratio.
Total Deposit Ratio: Total Deposit Ratio = (Total customer deposits/Total assets)
Year Ratios
2006
LIQUIDITY M N GEMENT OF CBL
0.861632
2007 0.831484
2008 0.788493
2009 0.81584
0.861632
0.831484
0.788493 0.81584 0.75
0.8 0.85 0.9
2006 2007 2008 2009
T DR
TD R
The higher the total deposit ratio, the lower is the perceived liquidity risk because contrary to purchased funds, retail deposits are less sensitive to a change in interest rates or a minor deterioration in business performance.
In 2006 city bank had lower liquidity risk but in 2008 it was highest liquidity risk and in 2009 it was moderately stronger position.
5. Loan-to-Deposit Ratio:
Many banks and bank analysts monitor loan-to-deposit ratios as a general measure of liquidity:
Loan - to -Deposit Ratio = (Net loans/Total deposits)
Year Ratios
2006 0.753137
2007 0.660796
2008 0.764311
2009 0.69707
0.753137
0.660796
0.764311
0.69707 0.6
0.7 0.8
2006 2007 2008 2009
L T D R
LTDR
Loans are presumably the least liquid of assets, while deposits are understood as the primary source of funds. A high ratio indicates illiquidity, because in this case a bank is fully loaned-up relative to its stable funding. Implicitly, it is assumed that new loans must be financed with large purchased liabilities. A low ratio suggests that a bank has additional liquidity, since it can grant new loans financed with stable deposits.
In 2008 bank had higher loan amount so it was higher illiquid but in 2007 city bank had lower ratio which suggested that it had additional liquidity.
6. Reserve Ratio:
Although there is no shortage of different liquidity indicators in the commercial banking literature, surprisingly there is rarely mention of a ratio that compares cash assets to customer deposits.
Reserve Ratio = (Cash assets/Customer deposits)
Year Ratios
2006 0.069127
2007 0.085769
2008 0.069281
2009 0.082425
LIQUIDITY M N GEMENT OF CBL
0.069127 0.085769
0.069281 0.082425 0
0.05 0.1
2006 2007 2008 2009
R R
R R
One could debate whether the numerator of the ratio should be cash assets or liquid assets. The idea of a liquidity reserve would obviously be best captured by including all liquid assets in the calculation. However, the analogy to a minimum reserve requirement imposed by the central bank is most obvious when limiting the numerator to vault cash and demand deposits with other banks.
In 2007 city bank had higher in cash position and in 2006 had lower cash position but in 2009 it was moderately well position.
5.3.g) Handling CBL’s liquidity crisis:
Liquidity management is an important problem of commercial banks. There are many possible reasons which may cause such problem. Some of the reasons of liquidity crisis are:
Short-term investment should be made out of short-term funds and long term investment should be made from long term funds.
Arrangements can be made to make repayments of liabilities not in bulk but in installments. It lowers the bank‟s risk in liability repayment and need to make a large single repayment will not arise at a time.
Indifference and or lack of cautious and close observation to deposits and loan behavior of the large prime customers.
If counter service is provided by efficient, skilled and well-behaved persons, then the clients mainly depositors and installment takers of borrowers, will patiently wait without any objection and do not complain to the higher authority about the unavailability of money. Thus, no bad impression about the service of the bank spreads among the public.
LIQUIDITY M N GEMENT OF CBL
If bank maintains regular linkage building rapport with these institutions, they may get regular and complete data and information from the bank with detail clarifications regarding liquidity and other operational trends of banks. With the help of such information and advice, understanding and reporting about bank‟s liquidity will be easier with clarifications.
To overcome crisis, banks should take develop connections and accessibility to the money market players and can take advance steps to manage inter bank loans or sell short term securities in the money market, whenever required. Thus, if liquidity crisis arises, bank can overcome the situation by collecting necessary funds. The bank, which sells securities with more reliability, credibility and stability, has the ability to avoid liquidity crisis timely or even can avoid the same in more efficient way.
Management of bank by professionally skilled and experienced personnel of both deposits and loan if done properly can avoid many problems not to speak the liquidity.
Liquidity crisis must occur if loan cannot be recovered in the right time and right amount.
On the other hand, the loan portion can be converted into debenture can be sold in the market for cash and thereby liquidity is managed by managerial maneuvering. By efficient and planned loan recovery and by ensuring loan conversion opportunity, liquidity crisis can be avoided and or minimized by the experienced and professionally trained bank personnel.