Question: A bank has currently the following balance sheet structure: (4 marks) Assets ($ million) Liabilities ($ million) Cash 100 Customer deposits 700 Debt securities issued

A bank has currently the following balance sheet structure: (4 marks)

Assets ($ million)

Liabilities ($ million)

Cash

100

Customer deposits

700

Debt securities issued by the government of Japan

50

Eurocurrency borrowings

210

Residential mortgage loans

150

Subordinated debts (>5 years)

20

Credit card loans

200

Retained earnings

40

Business loans

500

Common stocks

25

Equity notes

5

Total

1,000

Total

1,000

In addition, it has the following off-balance-sheet items (in $ million):

Contract

Size

Replacement costs

Trade-based commercial letters of credit

50

-

Interest-rate contract with maturity four months

70

3

  1. Calculate RWA for on-balance-sheet items.
  1. Calculate RWA for off-balance-sheet items.
  1. Calculate Total RWA for the bank.
  1. According to the Basel I capital requirements, is the bank adequately capitalized?

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