Question
A Bank has the following balance sheet (in millions), with the risk weights in parentheses. Assets Liabilities and Equity Cash (0%) $ 19 Deposits $
A Bank has the following balance sheet (in millions), with the risk weights in parentheses.
| Assets | Liabilities and Equity |
| ||||||||
| Cash (0%) | $ | 19 |
|
| Deposits | $ | 171 |
| ||
| Mortgage loans (50%) | $ | 65 |
|
| Subordinate debt (>5 years) | $ | 8 |
| ||
| Consumer loans (100%) | $ | 115 |
|
| Equity | $ | 16 |
| ||
| 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 credit to a public corporation and $30 million in 10-year FX forward contracts that are in the money by $2 million. 1- What is the common equity Tier I (CET1) risk-based capital ratio? 2- What is the Tier I risk-based capital ratio? 3- What is the total riskbased capital ratio?
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
