70.2K

Verified Solution

Link Copied!

A banks balance sheet information is shown below (in millions of dollars):

On-Balance-Sheet Assets	Face Value	Liabilities and equity	Face Value
Cash	$10	Demand deposits	140
Treasury bills	20	CDs	120
Long-term government securities	55	Commercial papers	40
Federal Reserve stock	40	Fed funds purchased	20
Repos secured by federal agencies	20	Convertible bonds	50
Claims on U.S. depository institutions	60	Subordinated bonds	40
Claims on or guaranteed by federal agencies	30	Perpetual preferred stock (nonqualifying)	10
Munis (general obligation)	25
Municipal revenue bonds	40	Retained earnings	30
Residential mortgages, category 1, loan-to-value ratio 75%	20	Common stock	20
Commercial loans	100	Noncumulative perpetual preferred stock (qualifying)	10
Consumer loans	50	Total liabilities and equity	480
Premises and equipment	20
Reserve for loan losses	-10
Total assets	$480

The off-balance-sheet items are (in millions of dollars):

Off-Balance-Sheet Items	Face Value
U.S. Depository Institution Counterparty
Loan commitments:<1 year	10
Loan commitments:>1 year	20
Commercial letters of credit	50
State and Local Government Counterparty
Loan commitments:>1 year	100
Standby letters of credit:Performance-related	20
Corporate Customer Counterparty
Loan commitments:<1 year	20
Loan commitments:>1 year	10
Standby letters of credit:Direct-credit substitute	50
Commercial letters of credit	60

Under the Basel III, calculate each following question:

1. (8 pts) What is the risk-adjusted on-balance-sheet assets of the bank ? You must show clearly each weight of your asset.

1. (8 pts) What is the off-balance-sheet assets of the bank ? You must show clearly each weight of your asset.

1. (4 pts) What are the CET1, Tier1, and total capital required for both off- and on-balance-sheet assets.

(2 pts) Please list clearly each item for Tier 1 capital, additional Tier 1, and Tier II capital

Answer & Explanation Solved by verified expert

See Answer