Third Bank has the following balance sheet (in millions), with the risk weights in parentheses.

Assets Liabilities and Equity

Cash (0%) K70 Deposits K175

OECD Interbank deposits (20%) K25 Subordinated debt (2.5 years) K3

Mortgage loans (50%) K70 Cumulative preferred stock K5

Consumer loans (100%) K20 Equity K2

Total Assets K185 Total Liabilities & Equity K185

The cumulative preferred stock is qualified and perpetual. In addition, the bank has K30 million in performance-related standby letters of credit (SLCs), K40 million in two-year forward FX contracts that are currently in the money by K1 million, and K300 million in six-year interest rate swaps that are currently out of the money by K2 million. 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:

1. What are the risk-adjusted on-balance-sheet assets of the bank as defined under the Basel Accord III?
2. What is the total capital required for both off- and on-balance-sheet assets?

3. Does the bank have enough capital to meet the Basel requirements? If not, what minimum Tier 1 or total capital does it need to meet the requirement?