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banking.
Wellfleet bank focus more on the syndicated and leverage loan segment.
The dilemma of this bank is the CEO Alastair Dawes wonder how to best evaluate
the quality and riskiness of mega-deals.
Given its strategy, what kind of risks does Wellfleet Bank face?
Credit risk
This is because this bank having more to syndicated loan and leverage loan.
as mention in the case, Wellfleet bank does not have investment bank but it
expanded its business by corporate banking. Thru this corporate banking
Wellfleet bank generate of 58 % of PAT
This two loan provided high return to the bank but it also has a high risk which
could effect bank position.
Given Wellfleets new focus on large corporate deals and its need to
recruit relationship managers from investment banks, what are the challenges
for
the risk culture of the organisation, and its style of risk management in
particular?
Firstly Wellfleet will offer their proposal through credit relationship manager.
In this case the credit relationship manager and chief risk officer disagree over
the proposal, then they will pass the proposal to the group credit commitee.
This is make the relationship manager have to wait longer because the group
credit committee require sign-off from regional and senior credit officer, this also
known as alpine-pass
Operational risk
In the case it is mention that the chief credit officer can make the final decision.
The authority of this chief credit officer was unlimited as long as it is within the
bank regulatory limits.
If the deputy group chief risk officer(GCRO) and group head of client
relationships(GHCR) disagreed over a proposal then the chief credit officer can
make the final decision.
Industries with higher human interaction are likely to have higher operational
risk.
Regulatory risk
International regulatory rules ( Basel II accord and guide line).
Wellfleet bank should to set aside and manage capital reserve to be balance with
the riskiness of their activity.
The risk that a change in laws and regulations will materially impact a security,
business, sector or market. A change in laws or regulations made by the
Even the company have a long term debt, this steel company need to acquire a
lot of fixed cost in order to grow and maximize their profit.
This is family business it is something that they should take a good care of the
business.
Disadvantages of Gatwick Gold Corporation(GGC)
41 % in South africa, this mean that this business will be under control of political
risk in Africa in the future.
Total debt to EBITDA was 800% in 2007 ( up from 200 % in 2006 ; 130 % in
2003 )
Mining cost is rapidly growing.
Credit grade is 5B
Balance sheet and income statement is bad.
Calculate the Expected Loss, Economic Revenue and Economic Profit for both
proposals.
Analyse the risk management process at Wellfleet Bank. What suggestions might
you make to the CEO about improving the process
In the case wellfleet bank has alpine pass. This alpine pass can be reduce by:
Giving the relationship bankers more responsibility within small credit or lower
risk.
As mention in the case CEO has not involving directly in the system. I suggest
that CEO, Alastair Dawes should involve in the system as the bank involve in
high profitable credit business.
In the case also mention that the risk function cant be so powerful that the bank
will never do anything because they dont like the risk. I think that wellfleet bank
should rearrange their limit and risk-weighted.
As for the group chief credit officer, they have ultimate decision and I think the
three member in the Group Credit commitee should discuss for a better option in
such proposal as GGC and Ashar industry than only relying on one party.