Provide a maximum 1500 word discussion and explanation of how Conventional banks determine the interest rates that they charge to borrowers accompanied by an opinion of whether you believe that it complies with ethical standards or not considering the prevailing level of bank interest rates. You can use internet, text books, the published financial information of banks, journal papers and newspaper articles to substantiate your answer. (Use the information of a specific country for better explanation)

Use the following structure for an answer:

a. Determine whether there are any Usury legislation (legislation pertaining to minimum or maximum interest rates that banks are allowed to charge) that banks have to comply with for the country that you are situated in and if such legislation exists, what impact it has on the interest rates charged by banks.

b. What were the interest rate changes over the past five years and why did it occur? Answer this question by providing a graph of the interest rates over the past five years and provide information about why these changes occurred. (Please specify the type of interest rates that you use in the graph e.g. interbank lending rates; rate set by the Central Bank etc.)

c. How did the interest rate changes effect the interest rate spreads and profitability of banks? Use the annual report of at least one bank and calculate the [(interest rate income minus interest expense in the income statement of the bank)/(interest earning assets of the bank) x 100] for the past five years. Plot it onto the graph with the rate changes in b. Please note that the earning assets are provided in the annual reports as one of the notes to the financial assets – you will find the total assets already shown to you in the relevant note. Also calculate the ROA for this bank for the past five years and also plot onto the graph. Now indicate how the interest income and profitability of the bank changed compared to the changes in interest rates based on an analysis from the graph.

d. Do you believe that the interest rates charged by banks are generally too high considering their income and expenses as well as the risks that they are exposed to? Use the analysis from the graph and also compare the ROA of the bank to the ROA of other types of businesses in different industries. Make a realistic conclusion.