Citigroup Balance Sheet and Total Capital Ratio
1、(1) What are the primary line items within Citigroup’s balance sheet and income statement?
Balance Sheet
Asset
Cash and due from banks
Deposits with banks
Federal funds sold and securities borrowed or purchased under agreements to resell
Trading account assets
Investments
Total loans, net
Liability
Total deposits
Short-term borrowings
Long-term debt
Equity
Common stock
Additional paid-in capital
Retained earnings
Income Statement
Income
Total revenue
Total provisions
Total operating expenses
Net income These are primary line items because of they are either great in amount or great in significance (Referred to as key performance indicators).
1、(2) Using the balance sheet as a reference, what happens during a “run on the bank”? “Run on the bank” caused a severe short of money for the Citigroup.
On the balance sheet:
Increased items
Cash and due from banks
Deposits with banks
Short-term borrowings
Long-term debt What happened: Borrowing more money to maintain its cash flow during a “run on the bank”, thus causing a significant increase in Long-term and short-term debts.
Total loans, net What happened: With an increasing debt amount and an increasing loan amount, the bank tried to earn a greater difference, in order to dispose of the run on the bank.
Decreased items
Investment;
Additional paid in capital
Retained earnings What happened: With insufficient cash flow, the bank decreased its investments. In the mean time, worse financial condition led to a decrease in stock price and retained earnings.
2、(1) What are the major US regulatory capital provisions, particularly the Tier1 capital ratio? As indicated in the case: Regulatory capital was capital that the Federal Reserve Board (the Fed) required banks in the U.S. to set aside to offset credit, market, and operational risks. Under rules initially issued in 1989, three primary ratios were used to assess capital adequacy: the Tier 1 capital
Balance Sheet
Asset
Cash and due from banks
Deposits with banks
Federal funds sold and securities borrowed or purchased under agreements to resell
Trading account assets
Investments
Total loans, net
Liability
Total deposits
Short-term borrowings
Long-term debt
Equity
Common stock
Additional paid-in capital
Retained earnings
Income Statement
Income
Total revenue
Total provisions
Total operating expenses
Net income These are primary line items because of they are either great in amount or great in significance (Referred to as key performance indicators).
1、(2) Using the balance sheet as a reference, what happens during a “run on the bank”? “Run on the bank” caused a severe short of money for the Citigroup.
On the balance sheet:
Increased items
Cash and due from banks
Deposits with banks
Short-term borrowings
Long-term debt What happened: Borrowing more money to maintain its cash flow during a “run on the bank”, thus causing a significant increase in Long-term and short-term debts.
Total loans, net What happened: With an increasing debt amount and an increasing loan amount, the bank tried to earn a greater difference, in order to dispose of the run on the bank.
Decreased items
Investment;
Additional paid in capital
Retained earnings What happened: With insufficient cash flow, the bank decreased its investments. In the mean time, worse financial condition led to a decrease in stock price and retained earnings.
2、(1) What are the major US regulatory capital provisions, particularly the Tier1 capital ratio? As indicated in the case: Regulatory capital was capital that the Federal Reserve Board (the Fed) required banks in the U.S. to set aside to offset credit, market, and operational risks. Under rules initially issued in 1989, three primary ratios were used to assess capital adequacy: the Tier 1 capital