Question
Consider an FI with the following off-balance-sheet items: A two-year loan commitment with a face value of $120 million, a standby letter of credit with
Consider an FI with the following off-balance-sheet items: A two-year loan commitment with a face value of $120 million, a standby letter of credit with a face value of $20 million and trade-related letters of credit with a face value of $70 million.
1). What is the total credit equivalent amount?
2). All counterparties have a credit rating of BBB. What is the capital amount of the FI needs to hold against these exposures assuming CAR of 10.5%?
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Financial Institutions Management A Risk Management Approach
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
8th edition
978-0078034800, 78034809, 978-0071051590
