A Bank has the following balance sheet (in millions), with the risk weights in parentheses. Liabilities and Equity Deposits $ 171 Subordinate debt (>5 years) S 8 Equity $ 16 Assets Cash (0%) $ 19 Mortgage loans (50%) $ 65 Consumer loans (100%) $ 115 Reserve for loan losses ($ 4) Total Assets $ 195 Total Liability and Equity $ 195 In addition, the bank has $30 million in commercial direct-credit substitute standby letters of m credit to a public corporation and $30 million in 10-year FX forward contracts that are in the money by $2 million. a. What are the risk-adjusted on-balance-sheet assets of the bank as defined under the Basel III? b. What are the common equity Tier I (CET1) risk-based capital ratio, Tier I risk-based capital ratio, and the total risk-based capital ratio? c. Disregarding the capital conservation buffer, does the bank have sufficient capital to meet the Basel requirements?

A Bank has the following balance sheet (in millions), with the risk weights in parentheses. Liabilities and Equity Deposits $ 171 Subordinate debt (>5 years) S 8 Equity $ 16 Assets Cash (0%) $ 19 Mortgage loans (50%) $ 65 Consumer loans (100%) $ 115 Reserve for loan losses ($ 4) Total Assets $ 195 Total Liability and Equity $ 195 In addition, the bank has $30 million in commercial direct-credit substitute standby letters of m credit to a public corporation and $30 million in 10-year FX forward contracts that are in the money by $2 million. a. What are the risk-adjusted on-balance-sheet assets of the bank as defined under the Basel III? b. What are the common equity Tier I (CET1) risk-based capital ratio, Tier I risk-based capital ratio, and the total risk-based capital ratio? c. Disregarding the capital conservation buffer, does the bank have sufficient capital to meet the Basel requirements?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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