This question is worth positive 2 marks for a correct answer This question is worth negative 2 marks for an incorrect answer Please select the neutral response for no penalty if you believe you are unable to answer this question The relevant domestic Australian regulator has recognised the following relationship between the ratings published by agency Panda Stoor Corporation's and the equivalent credit rating grades under the Standardised Approach CREDIT RATING GRADE P S Corp RATING 1 AAA to AA 2 A to A 3 BBB to BBB 4 BB to BB 5 B to B 6 CCC to D The regulator has also published the following mapping of Australian dollar claims against different counterparties for credit rating grades 1 through 6 COUNTERPARTY CREDIT RATING GRADE 1 2 3 4 5 6 Reserve Bank of Australia 0 0 0 0 0 0 Commonwealth government of Australia 0 0 0 0 0 0 State governments Territories 0 20 50 100 100 150 Commercial banks ( 3mth maturity) 20 20 20 50 50 150 Commercial banks ( 3mth maturity) 20 50 50 100 100 150 Corporations 20 50 100 100 150 150 FongBank is a small Australian commercial bank that has only the following assets All financial instruments are claims denominated in Australian dollars ASSET VALUE ADDITIONAL NOTES Notes Coins $84m All Australian dollars Gold bullion $745m Held in FongBank's vaults Commonwealth Government of Australia Treasury Bonds $422m Rated AAA by P S Corp Loan to State Government of New South Wales $42m Rated BBB by P S Corp 5 year term loan to Safe Bank of NSW $180m Rated BBB by P S Corp Loan to Dodgy Aeronautical Fusion Corportation $8m Rated BB by P S Corp FongBank has also provided Dodgy A F Corp with a performance related guarantee of $494 million You know that performance related guarantees have a credit conversion factor (CCF) of 50 Assuming Basel III requirements, calculate the minimum amount of Tier 1 capital (in $millions) that FongBank would need to have out of their total capital requirement Select one a I am unable to answer this question and accept 0 marks b $36 78 million c $18 72 million d $13 07 million e $16 47 million f $21 20 million g $21 96 million

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Posted on Oct 06, 2024

This question is worth positive 2 marks for a correct answer. This question is worth negative 2 marks for an incorrect answer. Please select the

This question is worth positive 2 marks for a correct answer.

This question is worth negative 2 marks for an incorrect answer.

Please select the neutral response for no penalty if you believe you are unable to answer this question.

The relevant domestic Australian regulator has recognised the following relationship between the ratings published by agency Panda & Stoor Corporation's and the equivalent credit rating grades under the Standardised Approach.

CREDIT RATING GRADE	P&S Corp RATING
1	AAA to AA-
2	A+ to A-
3	BBB+ to BBB-
4	BB+ to BB-
5	B+ to B-
6	CCC+ to D

The regulator has also published the following mapping of Australian-dollar claims against different counterparties for credit rating grades 1 through 6:

COUNTERPARTY	CREDIT RATING GRADE
COUNTERPARTY	1	2	3	4	5	6
Reserve Bank of Australia	0%	0%	0%	0%	0%	0%
Commonwealth government of Australia	0%	0%	0%	0%	0%	0%
State governments & Territories	0%	20%	50%	100%	100%	150%
Commercial banks (<3mth maturity)	20%	20%	20%	50%	50%	150%
Commercial banks (>3mth maturity)	20%	50%	50%	100%	100%	150%
Corporations	20%	50%	100%	100%	150%	150%

FongBank is a small Australian commercial bank that has only the following assets. All financial instruments are claims denominated in Australian dollars.

ASSET	VALUE	ADDITIONAL NOTES
Notes & Coins	$84m	All Australian dollars
Gold bullion	$745m	Held in FongBank's vaults
Commonwealth Government of Australia Treasury Bonds	$422m	Rated AAA by P&S Corp
Loan to State Government of New South Wales	$42m	Rated BBB+ by P&S Corp
5-year term loan to Safe Bank of NSW	$180m	Rated BBB- by P&S Corp
Loan to Dodgy Aeronautical Fusion Corportation	$8m	Rated BB- by P&S Corp

FongBank has also provided Dodgy A.F. Corp with a performance-related guarantee of $494 million. You know that performance-related guarantees have a credit conversion factor (CCF) of 50%.

Assuming Basel III requirements, calculate the minimum amount of Tier 1 capital (in $millions) that FongBank would need to have out of their total capital requirement.

Select one:

a. I am unable to answer this question and accept 0 marks.

b. $36.78 million

c. $18.72 million

d. $13.07 million

e. $16.47 million

f. $21.20 million

g. $21.96 million