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Happy Bank has the following balance sheet: Under Basel III, equity capital will be required to be approximately 8.5% of risk weighted assets for institutions
Happy Bank has the following balance sheet: Under Basel III, equity capital will be required to be approximately 8.5% of risk weighted assets for institutions that are not global systemically important banks. What is the maximum balance sheet size (earning assets) given the capital requirement? (Risk weights are provided below.) The Basel III leverage ratio also limits the size of the institutions balance sheet. Equity must be a minimum of 3% of the total earning assets. What is the maximum size of the balance sheet given the leverage ratio requirement? Does Happy Bank's current balance sheet meet the Basel III requirements in parts (a) and (b)? If not, what could be done to make the balance sheet meet the regulatory standards
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