1. Using the information below, find the following:

1. Tier 1 risk-based capital ratio and total risk-based capital ratio.
2. 
   
3. Is the bank complying with all the Basel I requirements?
4. 
   
5. Provide recommendations on how the bank can be more compliant with Basel I requirements.     

On-Balance Sheet Items (Assets)	(in millions)
Cash	$   10,000
Government securities	30,000
Interbank deposits	5,000
Home loans to personal finance customers	20,000
Loans to corporate customers	75,000
Total Balance Sheet Assets	$140,000
Off-Balance Sheet Items
Standby letters of credit backing corporate borrowings	$ 10,000
Long term unused loan commitments made to private corporations	20,000
Total Off-Balance Sheet Items	$30,000
Bank Capital
Common stock (par value)	$   1,000
Surplus	1,500
Retained earnings	1,500
Subordinated debentures	2,000
Minority interest in subsidiaries	1,000
Allowance for loan and lease losses (reserves)	1,000
Non cumulative perpetual preferred stock	1,000
Intermediate term preferred stock	4,000
Equity commitment notes	2,000

Answer rating: 100% (QA)

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