Question
Given the following Balance Sheet of a commercial bank: Balance Sheet Assets $ Million Liabilities $ Million Cash & Required Reserves 5 Demand Deposits 40
Given the following Balance Sheet of a commercial bank:
| Balance Sheet | |||
| Assets | $ Million | Liabilities | $ Million |
| Cash & Required Reserves | 5 | Demand Deposits | 40 |
| Deposits with Correspondent Banks abroad (rated A) | 30 | Saving Deposits | 110 |
| Eurodollar Bonds issued by Lebanon | 150 | Time Deposits | 190 |
| Loans to corporates (rated BB) | 40 | Debentures | 50 |
| CDs issued by the Central Bank in L.L. | 65 | Convertible bonds | 2 |
| Loans to B rated sovereign borrowers | 60 | CoCos | 5 |
| Investments in US treasuries | 25 | Subordinated Debt (10 years maturity) | 6 |
| Loans to SMEs (unrated) | 45 | Perpetual Bonds | 1 |
| LGs extended to contractors rated CC (assuming 30% of the time these LGs were called upon) | 20 | Common Stocks | 13 |
| LCs to corporates rated BB (assuming 40% historical default risk)
| 40 | Preferred Stocks | 3 |
| Loans Commitment to corporates rated B- | 10 | Retained Earnings | 0 |
- Calculate the risk weighted assets (both on balance sheet and off-balance sheet).
- Find Common Equity Tier 1 (CET 1), Tier 1 and Tier 2 Capital, and Leverage Ratio.
- Is this bank adequately capitalized based on Basel 3?
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