The assets and liabilities of a bank is shown below:Assets $ in millionRisk-weight %Cash2730%Commercial loans4,832100%Lending to OECD Banks1,26720%U.S. government securities1,2450%First lien residential mortgage3,69850%Fixed assets2,028100% Liabilities and Equity $ in millionDeposits10,765Retained earnings128Subordinated debt capital239Common stock (par value)52Surplus (on common stock)268Intermediate-term preferred stock194Noncumulative perpetual preferred stock87Cumulative perpetual preferred stock with unpaid dividends1,610 Suppose the operational risk asset amount and the market risk asset amount are $1,258 million and $1,539 million respectively.A.Does the bank meet the capital adequacy ratio (CAR) requirement of Tier 1 capital under Basel I? Explain.B.Does the bank meet the CAR requirement of Tier 1 capital under Basel II? ExplainC.Does the bank meet the CAR requirement of Tier 1 capital under Basel III? Explain.

Answer: As per Base 1 , CAR ( capital Adequacy Ratio) Should be 8% Capital Adequacy Ratio = (tier 1…

Answered: 0% Commercial loans 4,832 100%

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter13: Marketable Securities And Derivatives

Section: Chapter Questions

Problem 27P

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The assets and liabilities of a bank is shown below:

Assets
	$ in million	Risk-weight %
Cash	273	0%
Commercial loans	4,832	100%
Lending to OECD Banks	1,267	20%
U.S. government securities	1,245	0%
First lien residential mortgage	3,698	50%
Fixed assets	2,028	100%

	Liabilities and Equity
	$ in million
Deposits	10,765
Retained earnings	128
Subordinated debt capital	239
Common stock (par value)	52
Surplus (on common stock)	268
Intermediate-term preferred stock	194
Noncumulative perpetual preferred stock	87
Cumulative perpetual preferred stock with unpaid dividends	1,610

Suppose the operational risk asset amount and the market risk asset amount are $1,258 million and $1,539 million respectively.

A.Does the bank meet the capital adequacy ratio (CAR) requirement of Tier 1 capital under Basel I? Explain.

B.Does the bank meet the CAR requirement of Tier 1 capital under Basel II? Explain

C.Does the bank meet the CAR requirement of Tier 1 capital under Basel III? Explain.

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