Consider a bank with the following balance sheet. Bank Reserves and Treasury Bills have a zero weight. Municipal Bonds and Residential Bons have a 50% weight. Commercial Loans have a 100% weight. Under the original Basel Accord, calculate the banks risk- weighted assets. Is the bank under or over capitalized? Explain.

Assets Required Reserves $120 million

Excess Reserves $ 15 million

Municipal Bonds $100 million

Residential Mortgages $150 million

Commercial Loans $175 million

Liabilities

Checkable Deposits $450 million

Bank Capital $110 million