1.Third Bank has the following balance sheet (in millions of dollars) with the risk weights in parentheses.

In addition, the bank has $30 million in performance-related standby letters of credit (SLCs), $40 million in two-year forward FX contracts that are currently in the money by $1 million and $300 million in six-year interest rate swaps that are currently out of the money by $2 million. The risk weighting for all OBS is 100% in the case of Third Bank. Credit conversion factors (taken from Tables 18.6 and 18.7 ) are:

What are the risk-adjusted on-balance-sheet assets of the bank as defined under the Basel Accord?
What is the total capital required for both off- and on-balance-sheet assets?
Does the bank have enough capital to meet the Basel requirements? If not, what minimum Tier I or total capital does it need to meet the requirement? LO 18.6 , 18.7 , 18.8

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Liabilities and equity $175 3 5 2 $185 Cash (0%) Interbank deposits with AA rated banks (20%) Assets $20 Deposits 25 Subordinated debt (5 years) Residential mortgages non-insured with LVR of 85% (50%) Business loans to BB rated borrowers (100%) Total assets 70 Cumulative preference shares 70 Common equity $185 Total liabilities and equity