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.

2. Calculate RWA for off-balance-sheet items.

3. Calculate Total RWA for the bank.

4. According to the Basel I capital requirements, is the bank adequately capitalized?
   

Answer rating: 100% (QA)

RWA for onbalance sheet items Cash 100 Customer deposits 700 Debt securities issued by the ... View the full answer