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Monash Bank has the following balance sheet for 2020 (in millions of dollars). In addition, the bank has $30 million in performance-related standby letters of
Monash Bank has the following balance sheet for 2020 (in millions of dollars). In addition, the bank has $30 million in performance-related standby letters of credit (SLCs), $50 million in two-year forward FX contracts that are currently in the money by $4 million, and $300 million in six-year interest rate swaps that are currently out of the money by $1 million. Assume all off-balance sheet items counterparties are BBB+ rated according to Standard and Poor's rating. Note: Please refer to Basel tables (Standardized approach) for the credit weights and conversion factors. Meanwhile, the bank also has bank operational business specified as follows: (a) Calculate the risk-adjusted assets credit risk for on-balance-sheet and off-balance-sheet items of the bank as defined under the Basel III Accord. (4 marks) (b) Calculate the risk-adjusted assets for operational risk. (2 marks) (c) Assuming the Risk Weighted Assets for all other risks is zero, does Monash Bank have enough capital to meet its regulatory capital requirements of Common Equity Tier 1 (CET1), Tier 1 and Total regulatory capital? If not, what is the minimum Common Equity Tier 1 (CET 1 ), Tier 1 and Total regulatory capital does it need to meet them? (Show the new balance sheet after adjustment) Monash Bank has the following balance sheet for 2020 (in millions of dollars). In addition, the bank has $30 million in performance-related standby letters of credit (SLCs), $50 million in two-year forward FX contracts that are currently in the money by $4 million, and $300 million in six-year interest rate swaps that are currently out of the money by $1 million. Assume all off-balance sheet items counterparties are BBB+ rated according to Standard and Poor's rating. Note: Please refer to Basel tables (Standardized approach) for the credit weights and conversion factors. Meanwhile, the bank also has bank operational business specified as follows: (a) Calculate the risk-adjusted assets credit risk for on-balance-sheet and off-balance-sheet items of the bank as defined under the Basel III Accord. (4 marks) (b) Calculate the risk-adjusted assets for operational risk. (2 marks) (c) Assuming the Risk Weighted Assets for all other risks is zero, does Monash Bank have enough capital to meet its regulatory capital requirements of Common Equity Tier 1 (CET1), Tier 1 and Total regulatory capital? If not, what is the minimum Common Equity Tier 1 (CET 1 ), Tier 1 and Total regulatory capital does it need to meet them? (Show the new balance sheet after adjustment)
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