Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Refer to Table 1328. Onshore Bank has $29 million in assets, with risk-weighted assets of $19 million. Core Equity Tier 1 (CET1) capital is $900,000,

Refer to Table 1328. Onshore Bank has $29 million in assets, with risk-weighted assets of $19 million. Core Equity Tier 1 (CET1) capital is $900,000, additional Tier I capital is $250,000, and Tier II capital is $418,000. The current value of the CET1 ratio is 4.74 percent, the Tier I ratio is 6.05 percent, and the total capital ratio is 8.25 percent. Calculate the new value of CET1, Tier I, and total capital ratios for the following transactions.

  1. The bank repurchases $109,000 of common stock with cash.
  2. The bank issues $2.9 million of CDs and uses the proceeds to issue category 1 mortgage loans with a loan-to-value ratio of 70 percent.
  3. The bank receives $509,000 in deposits and invests them in T-bills.
  4. The bank issues $809,000 in common stock and lends it to help finance a new shopping mall. The developer has an A+ credit rating.
  5. The bank issues $1.9 million in nonqualifying perpetual preferred stock and purchases general obligation municipal bonds.
  6. Homeowners pay back $4.9 million of mortgages with loan-to-value ratios of 50 percent and the bank uses the proceeds to build new ATMs.

A) The bank repurchases $109,000 of common stock with cash. (Round your percentage answers to 2 decimal places. (e.g., 32.16))

image text in transcribed

B) The bank issues $2.9 million of CDs and uses the proceeds to issue category 1 mortgage loans with a loan-to-value ratio of 70 percent.

image text in transcribed

C) The bank receives $509,000 in deposits and invests them in T-bills. (Round your percentage answers to 2 decimal places. (e.g., 32.16))

image text in transcribed

D) The bank issues $809,000 in common stock and lends it to help finance a new shopping mall. The developer has an A+ credit rating. (Round your percentage answers to 2 decimal places. (e.g., 32.16))

image text in transcribed

E) The bank issues $1.9 million in nonqualifying perpetual preferred stock and purchases general obligation municipal bonds. (Round your percentage answers to 2 decimal places. (e.g., 32.16))

image text in transcribed

F) Homeowners pay back $4.9 million of mortgages with loan-to-value ratios of 50 percent and the bank uses the proceeds to build new ATMs. (Round your percentage answers to 2 decimal places. (e.g., 32.16))

image text in transcribed

image text in transcribed

image text in transcribed

image text in transcribed

\begin{tabular}{|l|l|l|} \hline CET1 ratio & % \\ \hline Tier I ratio & % \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline CET1 ratio & % \\ \hline Tier I ratio & % \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline CET1 ratio & % \\ \hline Tier I ratio & % \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline CET1 ratio & % \\ \hline Tier I ratio & % \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline CET1 ratio & % \\ \hline Tier I ratio & % \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline CET1 ratio & % \\ \hline Tier I ratio & % \\ \hline \end{tabular} Under the Basel III risk-based capital plan, each DI assigns its assets to one of several categories of credit risk exposure. Table 13-28 lists the key categories and assets in these categories. TABLE 13-28 Risk Weights for Calculating Risk-Weighted Assets for On-Balance-Sheet Items under Basel III 5. Exposures to public-sector entities (PSEs): General obligation exposures to U.S. PSEs Revenue obligation exposures to U.S. PSEs General obligation exposures to non-U.S. PSEs: CRC of 0-1 CRC of 2 CRC of 3 CRC of 4-7 OECD member with no CRC \begin{tabular}{|l|l|l|} \hline CET1 ratio & % \\ \hline Tier I ratio & % \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline CET1 ratio & % \\ \hline Tier I ratio & % \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline CET1 ratio & % \\ \hline Tier I ratio & % \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline CET1 ratio & % \\ \hline Tier I ratio & % \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline CET1 ratio & % \\ \hline Tier I ratio & % \\ \hline \end{tabular} \begin{tabular}{|l|l|l|} \hline CET1 ratio & % \\ \hline Tier I ratio & % \\ \hline \end{tabular} Under the Basel III risk-based capital plan, each DI assigns its assets to one of several categories of credit risk exposure. Table 13-28 lists the key categories and assets in these categories. TABLE 13-28 Risk Weights for Calculating Risk-Weighted Assets for On-Balance-Sheet Items under Basel III 5. Exposures to public-sector entities (PSEs): General obligation exposures to U.S. PSEs Revenue obligation exposures to U.S. PSEs General obligation exposures to non-U.S. PSEs: CRC of 0-1 CRC of 2 CRC of 3 CRC of 4-7 OECD member with no CRC

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management For Farmers And Rural Managers

Authors: Martyn Warren

4th Edition

0632048719, 9780632048717

More Books

Students also viewed these Finance questions