Question One Nienge Bank has the following balance sheet (in millions) with the risk weights in parentheses. Assets Liabilities and Equity Cash (0%) K20 Deposits K175 OECD Interbank deposits (20%) K25 Subordinated debt (2.5 years) K3 Mortgage loans (50%) K70 Cumulative preferred stock K5 Consumer loans (100%) K70 Equity K2 Total Assets K185 Total Liabilities & Equity K185 In addition, the bank has K30 million in performance-related standby letters of credit (SLCs), and K300 million in six-year interest rate swaps. Credit conversion factors follow: Performance-related standby LCs 50% 1-5 year foreign exchange contracts 5% 1-5 year interest rate swaps 0.5% 5-10 year interest rate swaps 1.5% Required a. What are the risk-adjusted on-balance-sheet assets of the bank as defined under the Basle Accord? (5 Marks) b. What is the total capital required for both off- and on-balance-sheet assets? (5 Marks) c. Does the bank have enough capital to meet the Basle requirements? If not, what minimum Tier 1 or total capital does it need to meet the requirement? (5 Marks) d. Discuss the major shortcomings of the Basle I accord