Question

UBL Bank currently has PKR 4600 million in transaction deposits on its balance sheet. The State Bank of Pakistan has currently set the reserve requirement at 10 percent of transaction deposits. If the State bank decreases the reserve requirement to 8 percent, reflect the result of this transaction on the balance sheet of UBL and effect of this change on its balance sheet

Answer 1

Total Assets = 4600 ,Total Liabilities = 4,600

Step-by-step explanation:

Given:

Deposits = 4,600 million

Reserve requirement = 10% of deposits

Computation:

Reserve requirement = 10% x 4,600 million

Reserve requirement = 460 million

Total Assets = Reserves + Outstanding Loan

Outstanding Loan = Deposits - Reserve requirement

Outstanding Loan = 4,600 million - 460 million

Outstanding Loan = 4,140 million

Balance sheet:

Assets: Liabilities:

Reserves 460 Deposits 4,600

Loans 4140

Total Assets 4600 Total Liabilities 4,600

Reserve requirement = 8%

Reserves requirement = 8% x 4,600

requirement = 368 million

Outstanding Loans = 4,600 - 368

Outstanding = 4,232 million

New Balance sheet:

Assets: Liabilities:

Reserves 368 Deposits 4,600

Loans 4,232

Total Assets 4600 Total Liabilities 4,600