Question: Using the standard practices in the US banking industry, calculate the followings based on the information provided in the table: Tier 1 risk-based capital adequacy
- Using the standard practices in the US banking industry, calculate the followings based on the information provided in the table:
- Tier 1 risk-based capital adequacy ratio. (2)
- Tier 2 risk-based capital adequacy ratio. (2)
- Total risk based capital adequacy ratio (both T1 and T2). (2)
- Is the bank complying with all the Basel I requirements? If not, provide recommendations on how the bank can be more compliant with Basel I requirements. (5)
| On-Balance Sheet Items (Assets) |
|
| Cash | $ 10,000 |
| Government Securities | 30,000 |
| Deposits held at other banks | 5,000 |
| Home loans to personal finance customers | 20,000 |
| Loans to private corporations | 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 |
| Common Stock | $3,000 |
| Cumulative Perpetual Preferred Stock | $6,000 |
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