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Nittany Lion Bank has the following balance sheet (in $m ). with the risk weights in parentheses. Nittany Lion Bank also has the following off-balance
Nittany Lion Bank has the following balance sheet (in $m ). with the risk weights in parentheses. Nittany Lion Bank also has the following off-balance sheet item: A $30 million in performance-related standby letter of credit (SLCs) to a public corporation with a conversion factor of 50%. Simplifying assumptions: - Risk weights of all off-balance sheet items are equal to 100%. - Regulator's CET1 ratio for adequate capitalization is 4.5%. Tier 1 ratio is 6.0%, and Total capital ratio is 8.0%. - There are no restrictions on how much subordinated debt and reserves you can count as Tier II capital. - Items that do not show up on the balance sheet ( e.g., Goodwill) have a value of zero. Answer the following question using the information above. Given Nittany Bank's total risk-weighted assets, how much Tier 1 capital should Nittany Bank be holding (in $m )? Answer the following question using the information above. Given Nittany Bank's total risk-weighted assets, how much Total capital should Nittany Bank be holding (in $m )? 10 12.5 12.625 15
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