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Bank A Bank B. 10 30 60 Market Risk (Rsm) 10 Operational Risk (Rsm) 40 Credit Risk (Rsm) 250 Capital Adequacy Ratio (CAR) | (%)

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Bank A Bank B. 10 30 60 Market Risk (Rsm) 10 Operational Risk (Rsm) 40 Credit Risk (Rsm) 250 Capital Adequacy Ratio (CAR) | (%) Tier 2 Capital (Rsm) Tier 1 Capital (Rsm) 0 15 (i) Calculate Tier 1 and Tier 2 of both Bank A and Bank B, assuming that for Bank A , Tier 1 is five times Tier 2 and for Bank B , Tier 1 is four times Tier 2. Show your calculations. (ii) You are an analyst and have to forecast which of the two banks will most likely withstand an economic downturn. Justify your recommendation

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