As of 1 Jan 2020, Alliance Bank has the following balance sheet and no off-balance sheet transactions
Question:
As of 1 Jan 2020, Alliance Bank has the following balance sheet and no off-balance sheet transactions or securitisation activities.
Assets | Liabilities and equity | ||
Cash | $24 | Deposits | $1176 |
Australian Treasury Bonds | $48 | Subordinated debt | $50 |
Loans to Australian corporates rated BBB+ | $660 | Common equity | $78 |
Fixed assets | $276 | Retained earnings | $12 |
Total assets | $1008 | Total liabilities and equity | $1008 |
Transactions during 2020
(a) February : Uninsured mortgages of LVR 90% amounting to $50mn were given out, funded from interbank loans on the wholesale market.
(b) March : Bank sold down some real estate and its fixed assets went down to $176mn. The proceeds from sale of $100mn was invested in Australian Treasury bonds.
(c) April : Bank gave out loan commitment with certain drawdown of $15mn to a resource company with credit rating BBB+ for a mining exploration project.
(d) May : The Treasury desk of Alliance Bank entered into a forward foreign exchange contract with notional exposure of $100mn with current exposure of $2.5mn, maturity of 4 years. The counterparty was BHP mining which has credit rating of A.
- What is the new common equity Tier 1 ratio of the bank after the transaction in February 2020?
- Using the financial data as of 1 January 2020 and ignoring the transactions in February and March, what is the new risk-weighted assets of this bank at end-April after the April transaction?
- Using the financial data as of 1 January 2020 and ignoring the transactions in February, March and April, what is the new risk-weighted assets of this bank after the May transaction?
- What is the total risk-weighted assets of this bank on 1 January 2020?
- What is the common equity Tier 1 (CET1) capital of this bank as of 1 January 2020?
- What is the new risk-weighted assets of the bank after the transaction in February 2020?
- Using the 1 Jan 2020 balance sheet information and only the March 2020 transaction (ignoring February 2020 transaction), what is the new Total Capital Adequacy Ratio (CAR) of Alliance Bank?
- Using the 1 Jan 2020 balance sheet information and only the March 2020 transaction (ignoring February 2020 transaction), what is the new risk-weighted assets of Alliance Bank?
- What is the total risk-weighted assets of this bank on 1 January 2020?
- Using the financial data as of 1 January 2020 and all the transactions in February, March, April and May, what was Alliance Bank's total regulatory capital adequacy ratio after the May transaction?
Financial Markets and Institutions
ISBN: 978-0077861667
6th edition
Authors: Anthony Saunders, Marcia Cornett