FACULTY OF COMMERCE

DEPARTMENT OF ACCOUNTING AND FINANCE

BANK LENDING & CREDIT RISK MANAGEMENT

Instructions

 Your assignment should include a Table of Contents page and a bibliography;

 Use Arial 12 font, spacing 1.5 lines. All text must be justified.
 Start each question on a new page, except for short answers.
 Each question should start with an introductory paragraph.
 No marks will be awarded if only the final answers are given. All relevant workings must be shown.
 The assessment criteria are:
o Substance
o Originality
o Presentation
 Use of illustration / examples where appropriate
 Independent research on the relevant topics where appropriate
 Special consideration would be given to students who demonstrates an in-depth analysis of the questions
 Candidates who simply regurgitate their answers from the course manual may risk failing the assignment
 Any similarities between individual assignments will result in a fail grade. Attach any antiplagiarism report (similarity of not
more that 20%) for the assignment to be marked.
 Pages should be clearly numbered
 The format of the assignment should be as follows:
 Front cover (i.e. title page), should be as provided with this assignment.
 References
o Example:
o Melville, A (2011): International Financial Reporting – A Practical Guide – 3 rd Edition, Prentice Hall.
 Complete your assignment and hand it in by: 29 February 2024.

Assignment 1
a. Assume that you are given the following information:

Expected Sales Expected Purchase

P P

Jan. 60,000 Jan. 48,000

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 Feb. 40,000 Feb. 80,000

Mar. 45,000 Mar. 81,000

Apr. 40,000 Apr. 90,000

The wages to be paid to workers amount to P5,000 each month. Also, the bank balance on 1st
January was P8,000. The management decided on the following:
 If the deficit fund is within the limit of P10,000, it is possible to make arrangements
with the bank.
 If the deficit fund exceeds P10,000 but is within the limit of P42,000, the issue of
debentures is preferred.
 If the deficit fund exceeds P42,000, the issue of shares is preferred (considering the
fact that it is within the limit of authorized capital).
REQUIRED:
From the information above, prepare a cash budget for the period from January to April 2023.
(15 marks)

b. Using relevant examples in each case, explain how do banks determine the
appropriate level of loan loss reserves to maintain on their balance sheets? (15 marks)
c. Provide an overview of the credit risk management framework adopted by a specific
bank or financial institution of your choice, highlighting its strengths and weaknesses.
(20 marks)

[TOTAL: 50 MARKS]

ASSIGNMENT 2

Instructions to candidates

1. Individual Presentations on power point slides.

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 2. Presentations are done during the course of learning (the last conduct hour of
every learning session).
3. The assignment is marked out of 100 per cent.
4. The above terms and conditions in assignment 1 are also valid.

NB: The student is expected to demonstrate knowledge of the subject by giving relevant
examples in each case.

1. Describe the key components of a comprehensive credit risk management

framework. Anita Kelesitse Thanye (01222372912)
2. Explain the process of credit analysis and evaluation undertaken by banks
before extending credit to borrowers. Boago Mitchelle Phagane
(01222347312)
3. Discuss the various types of credit risk faced by banks, providing examples for
each type. Fiona Jemwa (01222365212)
4. Describe the role of credit scoring models in evaluating borrower
creditworthiness and managing credit risk. Goabaone Lucas (01222388812)
5. How do banks determine the appropriate level of loan loss reserves to
maintain on their balance sheets? Katego Golekwang (01222365712)
6. Explain the concept of loan concentration risk and its implications for banks.
Konyana Binang (01222365412)
7. Describe the techniques banks use to monitor and manage credit risk in their
loan portfolios. Malebogo Onalenna Modisadife (01222375112)
8. Discuss the impact of economic factors on credit risk. Neo Ramusu
(01222347012)
9. Explain the main challenges faced by banks in managing credit risk, especially
during economic downturns? Oarabile Janet Kalaote (01222347512)
10. Discuss the role of regulatory requirements, such as Basel III, in shaping credit
risk management practices in banks. Ofile Letso Dikole (01222347912)
11. Describe the steps involved in conducting stress tests to assess credit risk
exposure. Omphile Ukarapo Musengua (01222347112)
12. Describe the risk-adjusted return on capital (RAROC) framework and its
relevance in credit risk management. Oratile Molefe (01181973512)

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13. Explain, how do banks use credit derivatives to transfer and manage credit risk
in their portfolios? Rebaone Kgosi (01222347812)
14. Describe bank lending and explain its importance in the financial
intermediation process. Rorisang Laolang (01222384112)
15. Explain the steps involved in the loan underwriting process and the criteria
banks use to assess borrower creditworthiness. Sereko Tshwene
(01222365112)
16. Provide an overview of the credit risk management framework adopted by a
specific bank or financial institution of your choice. Tefa Phillimon Seoseng
(01222364912)
17. Discuss the importance of effective communication and collaboration between
credit risk management, lending, and other departments within a bank. Theriso
Nkuetsho (01222311612)

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