7/22/2019 Banc One Quest

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Study Questions for Banc One Case

1. Can Banc Ones strategy of acquiring smaller banks be justified in terms of it producingbenefits to Banc Ones current shareholders? Why would a decline in Banc Ones stock price

hurt its acquisition strategy?

2. How do the terms asset sensitive and liability sensitive relate to the durations of a banks

net worth (equity). In terms of their asset and liability durations, what type of banks was Banc

One acquiring?

3. How could Banc One change its interest rate exposure (from being asset-sensitive to being

neutral or mildly liability sensitive) without using interest rate swaps?

4. Are interest rate swaps the better method for changing Banc Ones interest rate exposure?Why or why not?

5. What are basis swaps? Is there justification for Banc One using them?

6. What are AIRS and how do they differ from standard (plain vanilla) interest rate swaps? How

are AIRS used to construct a synthetic CMO position?

7. What strategic bets on interest rates are Banc Ones asset-liability managers taking? Should

they be pursuing these strategies? Do they add value to Banc Ones shareholders equity?

8. What would be your suggestion for dealing with Banc Ones falling stock price?