Financial Regulation & Supervision. Andrews Bank case study.

Financial Regulation & Supervision. Andrews Bank case study. Essay example
Masters
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Finance & Accounting
Pages 9 (2259 words)
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The following case analysis is an example of how financial regulation and supervision is important and needs to be implemented in order to keep employees within the realms of ethical and legal boundaries (Schooner & Taylor 2010)…

Introduction

Adam is a newly hired commercial loan officer in training at the Andrew and Andrews Bank. After clearing several credit analysis exams, he joined the bank with zeal and fervor towards credit analysis. Several of his seniors noticed him for his intelligence and smartness. Soon Adam was promoted to be a financial analyst and was assigned to his superior, Jon Smith who was a commercial loan officer. As part of his job, Adam was required to conduct credit analysis to check credit worthiness for all new customers that Jon brought into the bank. In one such case, where Roberts and Roberts had requested for a five million pound loan, Adam was extremely confused by the way Jon had handled the situation. Adam noted that the company, a retail store chain, was very highly leveraged with most of the exposure being handled by his bank. In most of the cases, Roberts and Roberts had undertaken operating leases which were not part of the long term loans like other leases. As an accounting regulation, finance leases are classified as long term loans while operating leases only come under contingencies and commitments and in the notes. As a result, Roberts and Roberts was playing with accounting rules and noting its operating leases under notes. Subsequently, when Adam analyzed the credit worthiness of the company, he found that the company was dangerously over leveraged and therefore was not a safe investment or customer for the bank.
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