Question
A banks balance sheet information is shown below (in millions of dollars): On-Balance-Sheet Assets Face Value Liabilities and equity Face Value Cash $10 Demand deposits
A banks balance sheet information is shown below (in millions of dollars):
On-Balance-Sheet Assets | Face Value | Liabilities and equity | Face Value |
Cash | $10 | Demand deposits | 140 |
Treasury bills | 20 | CDs | 120 |
Long-term government securities | 55 | Commercial papers | 40 |
Federal Reserve stock | 40 | Fed funds purchased | 20 |
Repos secured by federal agencies | 20 | Convertible bonds | 50 |
Claims on U.S. depository institutions | 60 | Subordinated bonds | 40 |
Claims on or guaranteed by federal agencies | 30 | Perpetual preferred stock (nonqualifying) | 10 |
Munis (general obligation) | 25 | ||
Municipal revenue bonds | 40 | Retained earnings | 30 |
Residential mortgages, category 1, loan-to-value ratio 75% | 20 | Common stock | 20 |
Commercial loans | 100 | Noncumulative perpetual preferred stock (qualifying) | 10 |
Consumer loans | 50 | Total liabilities and equity | 480 |
Premises and equipment | 20 | ||
Reserve for loan losses | -10 | ||
Total assets | $480 |
The off-balance-sheet items are (in millions of dollars):
Off-Balance-Sheet Items | Face Value |
U.S. Depository Institution Counterparty |
|
Loan commitments:<1 year | 10 |
Loan commitments:>1 year | 20 |
Commercial letters of credit | 50 |
State and Local Government Counterparty |
|
Loan commitments:>1 year | 100 |
Standby letters of credit:Performance-related | 20 |
Corporate Customer Counterparty | |
Loan commitments:<1 year | 20 |
Loan commitments:>1 year | 10 |
Standby letters of credit:Direct-credit substitute | 50 |
Commercial letters of credit | 60 |
Under the Basel III, calculate each following question:
- (8 pts) What is the risk-adjusted on-balance-sheet assets of the bank ? You must show clearly each weight of your asset.
- (8 pts) What is the off-balance-sheet assets of the bank ? You must show clearly each weight of your asset.
- (4 pts) What are the CET1, Tier1, and total capital required for both off- and on-balance-sheet assets.
(2 pts) Please list clearly each item for Tier 1 capital, additional Tier 1, and Tier II capital
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