The Civilian Bank has a balance sheet below $($the risk weights of the assets are in the parentheses$)$:

Assets

Value $($$ million$)$

Liabilities and Equity

Value $($$ million$)$

Cash

$63$

Deposits

$528$

OECD interbank deposits $(20\%)$

$75$

Subordinated debt $(5$ years$)$

$6$

Mortgage loans $(50\%)$

$210$

Noncumulative preferred stock $($qualified and perpetual$)$

$6$

Consumer loans $(100\%)$

$210$

Retained earnings

$2$

Reserve for loan losses

$(3)$

Equity

$13$

Total assets

$555$

Total liabilities and equity

$555$

In addition, the Civilian Bank has the following off$-$balance activities: $$90$ million in performance$-$related standby letters of credit $($SLCs$)$ to a public corporation, $$120$ million in two$-$year forward FX contracts that are currently in the money by $$3$ million, and $$900$ million in six$-$year interest rate swaps that are currently out of the money by $$6$ million. According to the Basel Accord, the credit conversion factors and the risk weights are:

Credit conversion factors

Risk weights

Performance$-$related standby LCs

$50\%$

$100\%$

$1$ to $5-$year foreign exchange contracts

$5\%$

$100\%$

$1$ to $5-$year interest rate swaps

$0\mathrm{.}5\%$

$100\%$

$5$ to $10-$year interest rate swaps

$1\mathrm{.}5\%$

$100\%$

The capital adequacy ratio:

Adequately capitalized zone

Well capitalized zone

CET$1$ capital

$4\mathrm{.}5\%$

$6\mathrm{.}5\%$

Tier I capital

$6\%$

$8\%$

Total capital required

$8\%$

$10\%$

Required:

a$.$ Calculate the risk$-$weighted on$-$balance$-$sheet assets, risk$-$weighted off$-$balance$-$sheet assets and total risk$-$weighted assets respectively for the Civilian Bank as defined under the Basel Accord. $(5$ marks$)$

b$.$ According to the total risk$-$weighted assets, calculate the CET$1,$ Tier I, and total capital required in terms of adequately capitalized zone. Does the Civilian Bank currently have enough capital to meet the Basel requirements of adequately capitalized zone? If not, what minimum CET$1,$ additional Tier $1,$ or total capital does it need to meet the requirement? $(6$ marks$)$

c$.$ According to your calculation above, work out the new balance sheet that meets the capital adequacy ratios of adequately capitalized zone. $(4$ marks$)$

d$.$ What buffers and$/$or surcharge may be applied to some banks$$ capital adequacy ratios and why? $(3$ marks$)$