ii. Calculate Tier 1 CAR, Common Equity Tier 1 CAR, and Total CAR and compare them with Basel III requirements. [4 marks]

A. TMK Bank has the following balance sheet (in millions of dollars) with the risk weights in parentheses. Assets Liabilities and equity $350 $40 Deposits 55 Subordinated debt (5 years) 20 Cash (0%) Interbank deposits with AA rated banks (20%) Standard residential mortgages (50%) Business loans to BB rated borrowers (100%) Total assets 15 100 Non-cumulative preference shares 210 Common equity 20 $405 Total liabilities and equity $405 In addition, TMK Bank has $40 million in performance-related standby letters of credit (SLCs) with credit conversion factor of 50%. Consider capital conservation buffer and assume that APRA suggests 1% countercyclical capital buffer due to COVID related effects. A. TMK Bank has the following balance sheet (in millions of dollars) with the risk weights in parentheses. Assets Liabilities and equity $350 $40 Deposits 55 Subordinated debt (5 years) 20 Cash (0%) Interbank deposits with AA rated banks (20%) Standard residential mortgages (50%) Business loans to BB rated borrowers (100%) Total assets 15 100 Non-cumulative preference shares 210 Common equity 20 $405 Total liabilities and equity $405 In addition, TMK Bank has $40 million in performance-related standby letters of credit (SLCs) with credit conversion factor of 50%. Consider capital conservation buffer and assume that APRA suggests 1% countercyclical capital buffer due to COVID related effects