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Imagine a bank with the assets below (with respective risk weights) and subject to both a traditional capital requirement and a leverage ratio requirement.
Imagine a bank with the assets below (with respective risk weights) and subject to both a traditional capital requirement and a leverage ratio requirement. Banking regulation requires the bank's capital ratio to be at least 9% and its debt-to-asset ratio to be equal or lower than 95% (leverage ratio requirement). List of Assets in the Bank's Balance Sheet Cash and Reserves, Value = $240M, Risk Weight = 0%. Mortgage Loans 1, Value = $660M, Risk Weight = 20%. Mortgage Loans 2, Value = $750M, Risk Weight = 60%. C&I Loans, Value = $900M, Risk Weight = 100%. Consumer Loans, Value = $450M, Risk Weight = 100%. Calculate the minimum amount of equity capital (in dollars) that the bank needs to have to satisfy both of these capital requirements.
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