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Third Bank has the following balance sheet ( in millions ) , with the risk weights in parentheses. Assets Liabilities and Equity Cash ( 0
Third Bank has the following balance sheet in millions with the risk weights in
parentheses.
Assets Liabilities and Equity
Cash $ Deposits $
OECD interbank deposits Subordinated debt years
Mortgage loans Cumulative preferred stock
Consumer loans Equity
Reserve for loan losses
Total assets $ Total liabilities and equity $
The cumulative preferred stock is qualifying and perpetual. In addition, the bank has $
million in performancerelated standby letters of credit SLCs to a public corporation, $
million in twoyear forward FX contracts that are currently in the money by $ million, and
$ million in sixyear interest rate swaps that are currently out of the money by $
million. Credit conversion factors follow:
Performancerelated standby LCs
to year foreign exchange contracts to year interest rate swaps
to year interest rate swaps
a What are the riskweighted onbalancesheet assets of the bank as defined under the
Basel Accord?
b To be adequately capitalized, what are the CET Tier I, and total capital required for
both off and onbalancesheet assets?
c Disregarding the capital conservation buffer, does the bank have enough capital to meet
the Basel requirements? If not, what minimum CET additional Tier or total capital
does it need to meet the requirement?
d Does the bank have enough capital to meet the Basel requirements, including the capital conservation buffer requirement? If not, what minimum CET additional Tier or total capital does it need to meet the requirement
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