IBSL Higher Diploma in Banking and Finance (HDBF) Exam cheat sheet

Bank balance sheet identity: Assets = Liabilities + Equity; loans and reserves are assets, deposits are liabilities.

Money multiplier = 1 / reserve requirement ratio; a 10% ratio implies a maximum deposit expansion of 10x new reserves.

Capital adequacy: Tier 1 capital ratio = Tier 1 capital / risk-weighted assets; Basel III minimum common equity Tier 1 is 4.5% of RWA.

Liquidity coverage ratio = high-quality liquid assets / net cash outflows over 30 days; Basel III minimum is 100%.

Net interest margin = (interest income − interest expense) / average earning assets.

Loan loss provision reduces net income; non-performing loan ratio = NPLs / total gross loans.

Duration gap: a positive gap means equity falls when interest rates rise; gap = asset duration − (liabilities/assets) × liability duration.

Deposit insurance protects depositors up to a statutory cap per depositor per bank, reducing bank-run risk.

Time value: FV = PV × (1 + r)^n; PV = FV / (1 + r)^n for annual compounding.

Net present value = sum of discounted cash flows minus initial outlay; accept projects with NPV > 0.

CAPM: required return = risk-free rate + beta × (market return − risk-free rate).

WACC = (E/V) × cost of equity + (D/V) × cost of debt × (1 − tax rate).

Bond price moves inversely to yield; a bond trades at par when coupon rate equals yield to maturity.

Duration approximates price sensitivity: % price change ≈ −modified duration × change in yield.

Gordon growth model: share value = next dividend / (required return − dividend growth rate).

Put-call parity: call − put = stock price − present value of strike price (non-dividend-paying stock).