1. What is the contribution to the credit riskadjusted asset base of the following items under the...
Question:
1. What is the contribution to the credit risk–adjusted asset base of the following items under the Basel II requirements? Under the U.S. capital–assets ratio?
$10 million cash reserves.
$50 million 91-day U.S. Treasury bills.
$25 million cash items in the process of collection.
$5 million U.K. government bonds, AAA rated.
$5 million Australian short-term government bonds, A rated.
$1 million general obligation municipal bonds.
$40 million repurchase agreements (against U.S. Treasuries).
$500 million one- to four-family home mortgages.
$500 million commercial and industrial loans, BBB rated.
$100,000 performance-related standby letters of credit to an AAA-rated corporation.
$100,000 performance-related standby letters of credit to a municipality issuing general obligation bonds.
$7 million commercial letter of credit to a foreign, A-rated corporation.
$3 million five-year loan commitment to an OECD government.
$8 million bankers acceptance conveyed to a U.S., AA-rated corporation.
$17 million three-year loan commitment to a private agent.
$17 million three-month loan commitment to a private agent.
$30 million standby letter of credit to back an A-rated corporate issue of commercial paper.
$4 million five-year interest rate swap with no current exposure (the counterparty is a private agent).
$4 million five-year interest rate swap with no current exposure (the counterparty is a municipality).
$6 million two-year currency swap with $500,000 current exposure (the counterparty is a low–credit risk entity).
Step by Step Answer:
Financial Institutions Management A Risk Management Approach
ISBN: 9780077211332
6th Edition
Authors: Anthony Saunders, Marcia Cornett