Performance-related standby LCs 50%

1- to 5-year foreign exchange contracts 5%

1- to 5-year interest rate swaps 0.5%

5- to 10-year interest rate swaps 1.5%

a. What are the risk-adjusted on-balance-sheet assets of the bank as defined under the Basel Accord?

b. To be adequately capitalized, what are the CET1, Tier I, and total capital required for both off- and on-balance-sheet assets?

Third Bank has the following balance sheet (in millions), with the risk weights in parentheses. $176 Assets Cash (0%) OECD interbank deposits (20%) Mortgage loans (50%) Consumer loans (100%) Reserve for loan losses (Tier II) Total assets $21 25 70 70 (1) $185 Liabilities and Equity Deposits Subordinated debt (Tier II) Cum. preferred stock (Tier I) Equity (CET) Total liabilities and equity $185 The cumulative preferred stock is qualifying and perpetual. In addition, the bank has $30 million in performance-related standby letters of credit (SLCs) to a public corporation, $40 million in two-year forward FX contracts that are currently in the money by $1 million, and $300 million in six-year interest rate swaps that are currently out of the money by $2 million. Credit conversion factors follow