Metro Bank has the following balance sheet (in millions), with the risk weights in parentheses. Assets Liabilities
Question:
Metro Bank has the following balance sheet (in millions), with the risk weights in parentheses.
Assets | Liabilities and Equity | |||||||||
Cash (0%) | $ | 19 | Deposits | $ | 171 | |||||
Mortgage loans (50%) | $ | 65 | Subordinate debt (>5 years) | $ | 8 | |||||
Consumer loans (100%) | $ | 115 | Equity | $ | 16 | |||||
Reserve for loan losses | ($ | 4 | ) | |||||||
Total Assets | $ | 195 | Total Liability and Equity | $ | 195 | |||||
In addition, metro bank has $30 million in commercial direct-credit substitute standby letters of credit to a public corporation and $30 million in 10-year FX forward contracts that are in the money by $2 million.
1- What is the common equity Tier I (CET1) risk-based capital ratio?
2- What is the Tier I risk-based capital ratio?
3- What is the total risk–based capital ratio?
Financial Institutions Management A Risk Management Approach
ISBN: 978-0071051590
8th edition
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders