Question
Given the following Balance Sheet of a commercial bank: Balance Sheet Assets $ Million Liabilities $ Million Cash & Required Reserves (0%) 20 Demand Deposits
Given the following Balance Sheet of a commercial bank:
Balance Sheet | |||
Assets | $ Million | Liabilities | $ Million |
Cash & Required Reserves (0%) | 20 | Demand Deposits | 55 |
Interbank Deposits abroad (rated A) (50%) | 40 | Saving Deposits | 100 |
Loans to corporates rated B (150%) | 160 | Time Deposits | 185 |
Investments in international securities (rated BB) (100%) | 40 | Debentures | 54 |
CDs issued by the Central Bank in L.L. (0%) | 30 | Convertible bonds | 5 |
Loans to B rated sovereign borrowers (100%) | 50 | CoCos | 6 |
Investments in US treasuries (0%) | 25 | Subordinated Debt (10 years maturity) | 5 |
Loans to SMEs (unrated) (200%) | 60 | Perpetual Bonds | 2 |
LGs extended to contractors rated CC (assuming 50% of the time these LGs are called upon (200%) of $5 not $10 | 10 | Common Stocks | 10 |
LCs to corporates rated BB (assuming 30% historical default risk) (100%) on $15
| 50 | Preferred Stocks | 3 |
Loans Commitment to corporates rated B- (150%) on $20 | 20 | Retained Earnings | 0 |
1)Calculate the risk weighted assets (both on balance sheet and off balance sheet), Common Equity Tier 1 (CET 1), Tier 1 and Tier 2 Capital, and Leverage Ratio.
2)Is this bank adequately capitalized based on Basel 1, 2 & 3.
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