Right, in this workout, we are being asked to use the assumptions below to calculate the stable funding ratio for the following banks. For simplicity's sake, we're just gonna do the first bank, the London Bank. We're gonna focus instead on the intuition behind this calculation. And we've been given a number of assumptions here. The required stable funding assumptions and the available stable funding assumptions. We're gonna come back to the intuition of that in a moment. And then we get a balance sheet for each bank here. And finally, we're asked to calculate the available stable funding. And what's our funding at the moment? Well, we have it here. Retail deposits, corporate deposits, bonds, and equity. So the available stable funding saying what of this funding can we keep relying on? How much of this funding is reliable for us? That's basically the intuition here. Okay, and that's what we're gonna use our assumptions for. So the available stable funding. So we're gonna start with our equity and regulatory capital. How much of that would we intuitively feel that we can depend on long term? Well, the intuition should be around about 100% because that cannot be pulled out of our funding. Let's see what the assumption is up here. Well, that is the 100% for the regulatory capital.

So next one up. Retail deposits. How much of those retail deposits can we rely on? Well, the assumptions are saying round about 90%, so we expect 90% to stay with us.

And then finally, we have some corporate deposits and those corporate deposits are 75. And there we expect that they can well, be pulled at least half of them. So we're assigning them a weight of 50%. And then our other liabilities, the bonds outstanding, we're not gonna rely on them at all. We're gonna put a zero weighting on them. So that gives us an available stable funding, 372 and a half. And again, that's funding that we expect to keep having. Okay, what about the required stable funding? Things that we need to keep funding. Okay. Right, what do we need to keep funding here? Okay, say for example, we have cash on the balance sheet. Do we need to keep funding that? No, we do not need to keep funding that. Cash can be paid out. We don't need to keep funding it. That's the intuition. Let's go up and do the calculations.

And just like we expected, cash has a zero weighting. We do not need to keep funding cash, 0%. And we're gonna multiply that by our cash position of 10. Right, what comes next is our high quality loans with less than a year's maturity. We're saying we probably need to keep funding at least 50% of them. That means that we could get rid of 50% but we'd keep funding 50%.

Those are our AAA rated loans with less than a year's maturity. Right, next one up is our residential mortgages. They have a weighting of 65%. It means that we can probably get rid of 35% but we have to keep funding the remaining 65%. 65% times our residential mortgages of 300.

And then finally, whatever's left here, we have a weighting of other assets with a maturity of more than one year. And that's got 100% weighting. We probably cannot get rid of them. So 100% times our PP&E, which is one asset. And the other asset is consumer loans with more than one year maturity. Close the bracket there and hit enter. Now there we see our required stable funding is 340.

So again, required stable funding. Things we need to keep funding. Okay, and both the available stable funding and the required stable funding are, of course, products of assumptions. And then finally, we just calculate the stable funding ratio. Of course, that's our available stable funding divided by our required stable funding. And for this bank, it's 1.1 over the magic 100%.