Question 1 (6 marks)

Regional Bank has the following balance sheet (in millions) and has no Off-Balance Sheet activities.

Assets ($M)		Liabilities and Equity ($M)
Required Reserve	$60	Deposits	$1,490
Treasury bills	$72	4-year Subordinated debts	$30
Single family mortgage	$530	Preferred stock	$5
Consumer loans	$750	Common stock	$65
Volatile commercial RE loans	$190	Retained earnings	$10
Allowance for loan losses	($2)
Total	$1,600	Total	$1,600

(a) The compliance officer of Regional Bank reveals that the bank is not well-capitalized and plans to increase the capital adequacy level. Consider the following scenarios separately. Answer in million.

(i) Calculate the Risk-Weighted Asset. (1 mark)

(ii) Calculate the additional common stock required so that common equity Tier I risk- based capital ratio can attain the Well-capitalized level. (1 mark)

(iii) Calculate the volatile commercial RE loan to be added by selling T-bills so that Total risk-based capital ratio can still remain at the Adequately-capitalized level. (2 marks)

(b) What is the meaning of countercyclical capital buffer? (2 marks)[no more than 50 words]