1. From the information below, calculate the Tier 1 risk-based capital ratio and total risk based capital ratio

(SLC Conversion factor 20%, unused loan commitment conversion factor 20%)

(Risk-weighting category: 0% for cash, equivalents and money market investments, 30% for Deposit at other banks and SLC, 30% for home

Is it in compliance with the BASEL I requirements? If not, explain how the bank management can rearrange the balance sheet and off balance sheet items to achieve compliance.

On balance sheet items (Asset) Cash $5,000 Cash equivalents $20,000 Deposit in other banks $80,000 Mortgages $95,000 PLC Loans $85,000 Total Balance Sheet $285,000 Assets Off Balance sheet items Standby letter of credit $20,000 $35,000 Long term unused loan commitments Total off balance sheet $55,000 items Tier 1 Capital $6,000 Tier 2 Capital $5,000 On balance sheet items (Asset) Cash $5,000 Cash equivalents $20,000 Deposit in other banks $80,000 Mortgages $95,000 PLC Loans $85,000 Total Balance Sheet $285,000 Assets Off Balance sheet items Standby letter of credit $20,000 $35,000 Long term unused loan commitments Total off balance sheet $55,000 items Tier 1 Capital $6,000 Tier 2 Capital $5,000