BFF2401 Commercial Banking and Finance

Individual Assignment
Semester 2, 2024
Due date: Tuesday 17th September 2024, 23:55
This individual assessment task is designed to test a student’s achievement of learning
objectives 1–6. The total mark is 50 marks (weight: 30% of total assessment).
Word limit: 2,000 words (±10%), excluding tables, graphs and references.
*****
TOPIC: Essay on banks’ liquidity risk and credit risk management

Question 1 (8 marks, ~400 words):

Explain why liquidity risk and credit risk can pose the most significant threats to the
solvency of commercial banks. Your answer must provide a comprehensive definition of
each risk and one (1) real-world example of each risk to illustrate its importance in a banking
context.
Question 2 (10 marks, ~300 words):
2A. Choose one (1) measure of banks’ liquidity risk, and find annual (yearly) data to
calculate this liquidity risk ratio for each of the top four Australian banks for the 2017-
2023 period. Generate one (1) line graph for the calculated liquidity risk ratio. (4
marks)
2B. Conduct peer and trend analyses based on your graph. Your analyses must be
supported with specific real-life evidence related to these banks’ liquidity and funding
management approaches. (6 marks)

NOTE: All tables of original dollar figures, formulas/workings and calculated

percentages/ratios, as well as one (1) line graph, must be presented in Part 2A. Your graph
must be fully labelled and professionally formatted and displayed.
Question 3 (20 marks, ~600 words):
3A. Choose two (2) measures of credit (default) risk associated with banks’ lending
activities, and find annual (yearly) data to calculate these credit risk ratios for each of
the top four Australian banks for the 2017-2023 period. Generate two (2) line graphs
for the calculated credit risk ratios. (8 marks)

3B. Conduct peer and trend analyses based on each of your graphs. Your analyses must be
supported with specific real-life evidence related to these banks’ credit risk
management strategies. (12 marks)

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NOTE: All tables of original dollar figures, formulas/workings and calculated
percentages/ratios, as well as two (2) line graphs, must be presented in Part 3A. Your graphs
must be fully labelled and professionally formatted and displayed.

Question 4 (8 marks, ~400 words):

In light of the current economic slowdown, interest rate environment and ongoing regulatory
developments, forecast how Australian banks’ liquidity risk and credit risk exposures will
change in the next 12-24 months. Provide strong reasons for your forecast.
Introduction and Conclusion (4 marks): Approximately 300 words are recommended for
introduction and conclusion together.
• Suggested data source for Questions 2 and 3: Banks’ annual reports and Basel III Pillar
3 regulatory disclosure reports published on their websites.
• Required format: 1.5-line spacing and 12-point font. Subheadings must be used to
separate the four questions and different sections.
• Total marks: Question 1 (8 marks) + Question 2 (10 marks) + Question 3 (20 marks) +
Question 4 (8 marks) + Introduction and Conclusion (4 marks) = 50 marks.
• Possible deductions: Referencing and/or formatting issues (deduction of up to 3
marks); Late penalty (deduction of 5% per calendar day late); Penalty for Turnitin
percentage above 20% (depending on nature of similarity).

Useful suggestions:
1. Your tutor will facilitate discussion on the assignment topic in Week 7 tutorials.
However, you should get started much earlier by reading the relevant materials, planning
your essay, extracting the required data from banks’ annual reports and/or Pillar 3
reports, etc. All questions related to the assignment should be sent to your tutor as the
first point of contact (via e-mail or during consultation); alternatively, you are
encouraged to post your questions on the General Discussion Board. Note that your
queries will be responded to during business hours.
2. The focus of the assignment is on the following topics: Topic 4 (Liquidity Risk), Topic 5
(Liabilities) and Topic 7 (Credit Risk) (and relevant textbook chapters). Students should
also expand their research outside the classroom materials to cover contemporary issues
such as the current economic and financial landscape, interest rate changes, and recent
regulatory developments.
3. Formulas needed to calculate the liquidity risk and credit risk ratios can be found in
Week 4 Liquidity Risk seminar slides (e.g., slide 40) and Week 7 Credit Risk seminar
slides (e.g., slide 21), respectively.

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4. The banks’ annual reports and their Pillar 3 reports contain the required data for Parts
2A and 3A. Several specific examples needed to support the peer and trend analyses in
Parts 2B and 3B can be found within relevant sections of the annual reports.
Please see below examples of National Australia Bank’s 2023 annual report and Pillar 3
report (both can be accessed from: https://www.nab.com.au/about-us/shareholder-
centre).
• https://www.nab.com.au/content/dam/nab/documents/reports/corporate/2023-
annual-report.pdf
• https://www.nab.com.au/content/dam/nab/documents/reports/corporate/2023-full-
year-pillar-3-report.pdf
5. Ensure to use Group (Consolidated) data to reflect the overall entity’s performance. All
dollar figures, relevant formulas/workings, and calculated percentages/ratios must be
tabulated and displayed in Parts 2A and 3A of your essay (an appendix is NOT required).
6. Note that the questions require you to find annual data and calculate the three ratios.
That means you must show the original dollar figures (for the numerator and
denominator), all formulas/workings and the calculated percentages or ratios in your
tables. If you simply use pre-calculated ratios copied from a source, you will earn lower
marks.
7. You should use Excel to construct the three (3) line graphs, then copy and paste these
graphs and display them professionally in Parts 2A and 3A respectively (underneath your
data tables). An example of a line graph can be found on slide 32 of Week 2 seminar.
8. For this assignment, you might want to have around 5-7 references. These are in addition
to the banks' annual reports and Pillar 3 reports which you may use to obtain figures and
insights into your analysis.
9. You should utilise the pre-submission checklist and marking criteria (detailed on pages
7-10 of this document) to ensure all the requirements of the task have been met.

Other suggested readings:

https://www.rba.gov.au/publications/fsr/2024/mar/
https://www.apra.gov.au/response-to-submissions-targeted-changes-to-adi-liquidity-and-
capital-standards
https://www.rba.gov.au/publications/fsr/2023/oct/focus-topic-an-update-on-fixed-rate-
borrowers.html
https://www.rba.gov.au/publications/bulletin/2023/sep/financial-stability-risks-from-
commercial-real-estate.html

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Instructions to students
You are required to retain a copy of the assignment until results are finalised. Any query by
email must be sent from your Monash student email address. Any other email addresses will
not be accepted.
Faculty style guide
Work submitted for this assessment must follow the ESSAY style as outlined here.
Submission date and time
The due date of the assignment is Tuesday 17th September 2024, before 23:55 (Week 9).
All assignments must be submitted online via Turnitin. The submission link can be accessed
from Week 9’s Own Time section or from the Assessments tab.
Submissions via e-mail will NOT be accepted.
Online Turnitin submission:
• Please submit ONE .docx file (other file formats may not be compatible for Turnitin).
The name of your .docx file should conform to the following format:
S22024 – Your First name and Last name and Student ID – Tutorial day and time –
Your tutor’s First name and Last name.
For example: S22024 – Jane Smith 1234567 – Wednesday 5PM – Xing Yan
• You must also include these details (your full name, student ID, tutorial time, and
your tutor’s name) on the first page of your assignment file.
• Please DO NOT include any assignment cover-sheet as it may bias the Turnitin
similarity percentage.
• Ensure to click on the SUBMIT ASSIGNMENT button and accept the student
statement to finalise your submission before the due date. Ensure the task status is
recorded as “Submitted for Grading”. Assignments left in draft mode will not be
graded.
TURNITIN: A Turnitin similarity report of 20% or below is acceptable, anything above 20%
will be investigated, penalised, or failed depending on the nature of similarity. Note that you
can replace (re-upload) your file only when it is in draft mode. Once your file has been
formally submitted, the system will not allow any further changes.
Students who use Apple MacBook to prepare their assignment must convert their final
.pages file to .docx before submission. Otherwise, pages. files cannot be read by Turnitin and
will not be accepted for grading.

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Conditions for the use of generative artificial intelligence (AI)
AI & Generative AI tools may be used SELECTIVELY within this assessment.
In this task, AI can be used as specified for one or more parts of the assessment task as
described below.
In this assessment, you can use generative AI in order to help guide your thinking, refine
ideas, and check and proofread your work for clarity, structure and grammar. You may also
use AI to do the review of the relevant literature or previous research. AI and Gen AI must
not be used to generate a written response to the assessment task or any part of it and you
must not copy paste from Gen AI. A full declaration of AI use must be provided as per the
instructions in the assessment task.
Where used, AI must be used responsibly, clearly documented and appropriately
acknowledged (see Learn HQ).
Any work submitted for a mark must:
• represent a sincere demonstration of your human efforts, skills and subject knowledge
that you will be accountable for.
• adhere to the guidelines for AI use set for the assessment task.
• reflect the University’s commitment to academic integrity and ethical behaviour.
Inappropriate AI use and/or AI use without acknowledgement will be considered a breach of
academic integrity.
IMPORTANT: It is a student’s responsibility to fact-check and critically evaluate AI tools’
trustworthiness. These tools can compromise your privacy, security, creativity, intellectual
abilities, and should be used carefully.
Acknowledgement of AI use
If generative AI was used, students must include the following paragraph on the first page of
their assignment file.
“I acknowledge the use of <insert AI system(s) and link> to generate materials for
background research, guide my thinking, refine ideas, and/or check and proofread my work
for clarity, structure and grammar. No content generated by AI technologies has been
presented as my own work.”
Academic integrity
In order to ensure the academic integrity of your submission and to deter others from copying
your work, your submission may be processed by text matching software such as Turnitin.
For additional information, please refer to the University's Student Academic Integrity Policy
and read the detailed guidance on How to Use Turnitin.
Serious cases of academic misconduct may be reported to the University.

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Referencing requirements
To build your skills in citing and referencing, and using different referencing styles, see the
online resources Citing and Referencing Tutorial. In this unit you are required to use the APA
referencing style for written reports. You can get more information about using the APA
reference style from the Monash Library Resource.
Estimated return date
Students can expect to receive feedback on this assessment within three weeks of submission.
Applications for extension of time (special consideration)
Information on eligibility and how to apply for an extension on your assignment can be found
here: https://www.monash.edu/students/admin/assessments/extensions-special-consideration
Penalty for late submission
Unless an extension or special consideration has been granted, students who submit an
assessment task after the due date will receive a late-submission penalty of 5 per cent of the
available marks in that task. A further penalty of 5 per cent of the available marks will be
applied for each additional day (24-hour period), or part thereof, the assessment task is
overdue.
LATE submission: Late assignments must also be submitted via the same Turnitin link. Late
penalties are based on the submission time recorded on Moodle. Tasks submitted more than
seven days after the due date will not be marked. For further details, please refer to
Monash University Marking and Feedback Procedure.

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 BFF2401 Commercial Banking and Finance

Individual Assignment - Semester 2, 2024

Word limit: 2,000 words (±10%), excluding tables, graphs and references.
Pre-Submission Checklist

TOPIC: Essay on banks’ liquidity risk and credit risk management Marks
Introduction and Conclusion 4
Q1 Explain why liquidity risk and credit risk can pose the most significant threats to the 8
solvency of commercial banks. Your answer must provide a comprehensive definition of
each risk and one (1) real-world example of each risk to illustrate its importance in a
banking context.
Guide:
✓ Evaluate the importance of liquidity risk to the solvency of commercial banks. Your
answer must clearly define liquidity risk and illustrate its importance with a real-world
example.
✓ Evaluate the importance of credit risk to the solvency of commercial banks. Your
answer must clearly define credit risk and illustrate its importance with a real-world
example.
Q2 A. Choose one (1) measure of banks’ liquidity risk, and find annual (yearly) data to 4
calculate this liquidity risk ratio for each of the top four Australian banks for the 2017-
2023 period. Generate one (1) line graph for the calculated liquidity risk ratio.
B. Conduct peer and trend analyses based on your graph. Your analyses must be 6
supported with specific real-life evidence related to these banks’ liquidity and funding
management approaches.
NOTE: All tables of original dollar figures, formulas/workings and calculated
percentages/ratios, as well as one (1) line graph, must be presented in Part 2A. Your
graph must be fully labelled and professionally formatted and displayed.
Guide:
✓ Table(s) of raw $ data (extracted from bank reports), relevant formulas/workings and
calculated ratios/percentages must be shown in Part 2A.
✓ One (1) line graph for the required number of years and banks must be placed
underneath the data table(s) in Part 2A.
✓ Detailed and valid trend analysis and peer analysis for the liquidity risk ratio, supported
by specific examples of banks’ liquidity and funding management approaches.

Q3 A. Choose two (2) measures of credit (default) risk associated with banks’ lending 8
activities, and find annual (yearly) data to calculate these credit risk ratios for each of
the top four Australian banks for the 2017-2023 period. Generate two (2) line graphs
for the calculated credit risk ratios.
B. Conduct peer and trend analyses based on each of your graphs. Your analyses must 12
be supported with specific real-life evidence related to these banks’ credit risk
management strategies.
NOTE: All tables of original dollar figures, formulas/workings and calculated
percentages/ratios, as well as two (2) line graphs, must be presented in Part 3A. Your
graphs must be fully labelled and professionally formatted and displayed.
Guide:
✓ Table(s) of raw $ data (extracted from bank reports), relevant formulas/workings and
calculated ratios/percentages must be shown in Part 3A.
✓ Two (2) line graphs for the required number of years and banks must be placed
underneath the data table(s) in Part 3A.
✓ Detailed and valid trend analysis and peer analysis for each of the credit risk ratios,
supported by specific examples of banks’ credit risk management strategies.

(to be continued on next page)

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Q4 In light of the current economic slowdown, interest rate environment and ongoing 8
regulatory developments, forecast how Australian banks’ liquidity risk and credit risk
exposures will change in the next 12-24 months. Provide strong reasons for your forecast.
Guide:
✓ You must provide a forecast of how Australian banks’ liquidity risk and credit risk
exposures will change in the next 12-24 months.
✓ Marks are awarded based on relevance, logical reasoning, in-depth elaboration and
strong evidence-based arguments supporting your forecast.

TOTAL MARKS: 50
POSSIBLE DEDUCTIONS
Referencing and/or formatting issues (up to 3 marks) ---
Late deduction (5% per calendar day late) ---
Turnitin similarity above 20% (depending on nature of similarity) ---

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 Marking criteria

Criterion HD (80-100%) D (70-79%) C (60-69%) P (50-59%) N (0-49%)

Literature and evidence base Response makes Most points in the All key points, Key points in the Most points in the
(Citing and referencing) effective use of a argument are and some response are response lack
wide range of informed by relevant, additional ideas supported by credible, relevant
relevant, credible and credible and reliable are supported by relevant, credible or reliable
reliable sources to literature. relevant, credible sources. Other evidence to
inform the argument sources. Some ideas need further support them.
throughout. ideas do not have referencing.
any appropriate
citations.

Knowledge of topic The response There is evidence of The response Knowledge of There is scant
demonstrates an awareness and demonstrates principles and knowledge of
insight, awareness understanding of sound concepts is at principles and
and understanding deeper and more knowledge of least adequate concepts.
of deeper and more subtle aspects of the principles and to communicate
subtle aspects of the topic. concepts. intelligently in
topic. Ability to the topic and to
consider topic in serve as a
the broader context
basis for further
of the discipline.
study.

Articulation of argument The response There is evidence of The argument is The argument is There is very little
demonstrates strong originality and well-reasoned sound based on evidence of ability
evidence of independent thought. based on broad evidence. of construct
originality and evidence. coherent
independent thought. argument.

Analytical and evaluative The response There is clear There is There is some There is very little
skills demonstrates highly evidence of evidence of evidence of evidence of
developed analytical analytical and analytical and analytical and analytical and
and evaluative evaluative skills. evaluative evaluative skills. evaluative skills.
skills. skills.

Structure The response is The response The response A basic attempt to The information is
effectively structured includes appropriate includes structure the jumbled and lacks
at each level (whole sections and clear appropriate response into structure.
document, sections paragraphs each with sections. sections is
and paragraphs). their own focus. evident.

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Style and formatting The response has an The response mostly The tone of the The tone of the The tone of the
academic tone. has an academic tone, response changes response is response is casual
but lapses into frequently academic in and informal.
informality in a few between sections, places, but with
Formatting meets all places. with some numerous lapses
stated requirements. academic phrasing into informality. Formatting is
and some inconsistent with
Formatting is mostly informality. most
consistent with stated Basic formatting requirements.
requirements. is consistent with
Formatting is
requirements, but
largely
several details
appropriate in
have been
some sections, but
overlooked.
there is
inconsistency
across the
document.

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