Question
From the information below, calculate the Tier 1 risk-based capital ratio and total risk based capital ratio (SLC Conversion factor 10%, unused loan commitment conversion
From the information below, calculate the Tier 1 risk-based capital ratio and total risk based capital ratio
(SLC Conversion factor 10%, unused loan commitment conversion factor 20%) (Risk-weighting category: 0% for cash, equivalents and money market investments, 10% for Deposit at other banks and SLC, 50% for home loans, 100% for loan to Private Corporation, Unused commitment and fixed asset)
On balance sheet items (Asset) Cash $5,000 Cash equivalents $12,000 Deposit in other banks $150,000 Mortgages $75,000
PLC Loans $25,000 Total Balance Sheet Assets
$267,000
Off Balance sheet items Standby letter of credit $20,000 Long term unused loan commitments
$35,000
Total off balance sheet items
$55,000
Tier 1 Capital $18,000 Tier 2 Capital $26,000
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 the compliance.
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