Written Assignment _2-bank Fragility

FIN320 KARIM PAKRAVAN Written Assignment #2-Banking sector fragility This is an individual assignment. Keep your write-up under two pages First Draft Due Wed 11/4-No exceptions Economists characterize the banking/financial systems as fragile, i.e. something that is delicate and easily broken. In the first section of your paper, discuss the concept of “fragility” in the context of banking in the context of the risks facing the banking system. Focus on both “systemic” (or “macro fragility”) and individual institutions , or “micro-fragility”. Discuss briefly the factors that have led to greater fragility of the banking system in the past decade. Present a brief description of the steps taken by governments to mitigate banking sector fragility In the second section, put yourself in the role of the president of a mid size commercial bank. Establish a simple balance sheet for the bank. What kind of risks do you face as an individual bank? Jamie Dimon, CEO of JPMorgan Chase, has boasted about the “fortress” balance sheet of the bank. Discuss this concept in the context of the CAMEL (Capital adequacy, Asset Quality, Management, Earnings, Liquidity). What would you, as the bank president, do to build a “fortress balance sheet”?