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

Assets		Liabilities and Equity
Cash (0%)	$40	Deposits	$350
Interbank deposits with AA rated banks (20%)	$55	Subordinated debt (5 years)	$20
Standard residential mortgages (50%)	$100	Non-cumulative preference shares	$15
Business loans to BB rated borrowers (100%)	$210	Common equity	$20
Total assets	$405	Total liabilities and equity	$405

In addition, TMK Bank has $40 million in performance-related standby letters of credit (SLCs) with credit conversion factor of 50%. Consider capital conservation buffer and assume that APRA suggests 1% countercyclical capital buffer due to COVID related effects.

i. What is the total minimum capital required under Basel III? [1 mark]

ii. Calculate Tier 1 CAR, Common Equity Tier 1 CAR, and Total CAR and compare them with Basel III requirements. [4 marks]

iii. Does TMK Bank have enough capital to meet the regulatory capital requirements? Explain. [2 marks]