QUESTION 5B BANK CAPITAL (12 MARKS) MONSU Bank has presented the following information Assets Amount ($ millions) Credit risk weight Regulatory capital Amount ($ millions) 3 month Treasury bills 2,500 0 Ordinary shares 450 Loans to local ADIs, S P rating AA 3,750 20 Retained earnings 610 Standard residential mortgages (no insurance, LVR 80 ) 6,150 50 Perpetual floating rate notes 250 Corporate loans, S P rating BB 9,500 100 Term subordinated debts 200 Total assets 21,900 Total regulatory capital 1,510 (i) Calculate the credit risk weighted assets (show all workings) (3 marks) (ii) Calculate the risk based capital ratios for Common Equity Tier 1, Tier 1, and total regulatory capital (show all workings) (6 marks) (iii) Assuming MONSU Bank has NO market risk or operational risk, assess whether the bank has met the Basel III minimum requirements (including the capital conservation buffer) for each of the three (3) capital ratios calculated in part (ii) (3 marks)

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Oct 06, 2024

QUESTION 5B. BANK CAPITAL (12 MARKS) MONSU Bank has presented the following information. Assets Amount ($ millions) Credit risk weight Regulatory capital Amount ($ millions)

QUESTION 5B. BANK CAPITAL (12 MARKS)

MONSU Bank has presented the following information.

Assets	Amount ($ millions)	Credit risk weight	Regulatory capital	Amount ($ millions)
3-month Treasury bills	2,500	0%	Ordinary shares	450
Loans to local ADIs, S&P rating AA	3,750	20%	Retained earnings	610
Standard residential mortgages (no insurance, LVR>80%)	6,150	50%	Perpetual floating-rate notes	250
Corporate loans, S&P rating BB+	9,500	100%	Term subordinated debts	200
Total assets	21,900		Total regulatory capital	1,510

(i) Calculate the credit-risk-weighted assets (show all workings). (3 marks)

(ii) Calculate the risk-based capital ratios for Common Equity Tier 1, Tier 1, and total regulatory capital (show all workings). (6 marks)

(iii) Assuming MONSU Bank has NO market risk or operational risk, assess whether the bank has met the Basel III minimum requirements (including the capital conservation buffer) for each of the three (3) capital ratios calculated in part (ii). (3 marks)