UoA Bank has the following balance sheet (in millions), with the risk weights in parentheses. The bank has no off balance sheet activities. Assets Liabilities and Equity Cash(0%) $30 Deposits $180 Subordinated debt (less than 5 years) 10 OECD interbank deposits (20%) 40 Subordinated debt (over 5 years) 5 Mortgage loans (50%) 75 Non-cumulative (perpetual) preference shares 5 Consumer loans (100%) 60 Equity 5 Total Assets $205 Total liabilities and equity $205 (a) Assuming that operational risk and market risk are both zero, does the bank have enough capital to meet the Basel III Common Equity Tier 1, Total Tier 1, Total capital requirements? (2 marks) (b) Explain how capital conservation buffer and countercyclical capital buffer imposed in Basel III attempt to address systemic risk issues of Basel II (4 marks) (c) Explain why Basel III capital requirements fail to incorporate potential capital savings from portfolio diversification (4 marks)