Assignment #01 Marks= 20

Credit & Risk management (FIN725)

ANB limited is a large size bank operating for the last 20 years, with the increase in challenges of financial markets the management has to invest more towards risk management. Although bank has a proper risk management system but the amount of non-performing loans (NPLs) is increasing with the increase in lending. Management is worried about NPLs as they can negatively affect the profitability of bank in long run. To address this issue; top management has called risk managers to review why NPLs are increasing. Risk managers have identified loans as main source of credit risk and increasing NPLs for the banks. They have reported that bank has adopted proper credit risk management process for lending; internal as well as external ratings are used in loan process to check the creditworthiness of borrowers. Once loan is granted after proper investigation of borrowers; our duty is over, said by one of the risk managers. Senior management and risk managers have been asked to suggest the ways to reduce the amount of NPLs and to mitigate the credit risk, bank is currently facing. After reading the above case and the article “Credit Risk and Commercial Banks Performance in Tanzania: a Panel Data Analysis” provided in downloads section of your course website analyze the risk management of ANB on the basis of following questions:

Have risk managers correctly identified the source of credit risk for ANB Limited? If no, what are the other factors that contribute towards credit risk?

Have ANB adopted effective risk management system to mitigate credit risk? Which internal (Bank’s internal systems) and external (regulatory and market)

measures can be adopted by the bank to control the increasing amount of NPLs? NOTE: You have to analyze the risk management of ANB in the light of above mentioned article (Consider the introduction, literature review and conclusion parts of article for the given case). Step wise instructions for downloading article and solution-format file 1. Go to Your VULMS account 2. Log in by giving your username and password 3. Find the course “FIN725 – Credit & Risk Management” 4. Click the tab “Course website” 5. Click the tab “Downloads” 6. Click the link titled “Assignment-article” to download the file. Read article, prepare answers and submit it on LMS within due date. IMPORTANT NOTE:

Before attempting the assignment, thoroughly read the article twice or thrice for better understanding

Answer all given questions with reference to given article

Answer the questions in your own words after understanding the content of article. Copying material directly from article is not allowed. We encourage your efforts to prepare answers with your own understanding

General Instructions: Due date:

Make sure to upload the solution file before the due date on VULMS Any submission made via email after the due date will not be accepted

FORMATTING GUIDELINES: Use the font style “Times New Roman” or “Arial” and font size “12” It is advised to compose your document in MS-Word format You may also compose your assignment in Open Office format Use black and blue font colors only

RULES FOR MARKING Please note that your assignment will not be graded or graded as Zero (0), if:

It is submitted after the due date The file you uploaded does not open or is corrupt It is in any format other than MS-Word or Open Office; e.g. Excel, PowerPoint, PDF etc. It is cheated or copied from other students, internet, books, journals etc.

OTHER IMPORTANT INSTRUCTIONS: If plagiarism found more than 10%, your assignment will be marked zero because

university is following no plagiarism policy Copy paste of data without any logical reason will also be marked zero Do not put so much emphasis on the statistical section (statistical model that has been

used and applied in the study) of the article as it will enhance your study of article but will not be discussed in the critical review of the paper

Give to the point and concise answers because irrelevant material will be marked zero

Best of Luck!!