9. Third Bank has the following balance sheet (in millions), with the risk weights in parentheses. ( LG 13- 7 )

Assets Liabilities and Equity Cash (0%) $ 20 Deposits $178 OECD interbank Subordinated debt deposits (20%) 25 (5 years) 3 Mortgage loans (50%) 70 Cumulative preferred stock 2 Consumer loans (100%) 70 Equity 2 Total assets $185 Total liabilities and equity $185 The cumulative preferred stock is qualifying and perpetual.

In addition, the bank has $30 million in performance-related standby letters of credit (SLCs) to a BB rated corporation,

$40 million in two-year forward FX contracts that are currently in the money by $1 million, and $300 million in sixyear interest rate swaps that are currently out of the money by $2 million. Credit conversion factors follow:

Performance-related standby LCs 50%

1- to 5-year foreign exchange contracts 5%

1- to 5-year interest rate swaps 0.5%

5- to 10-year interest rate swaps 1.5%

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 onbalance-

sheet assets?

Does the bank have enough capital to meet the Basel requirements? If not, what minimum Tier 1 or total capital does it need to meet the requirement?