Third Fifth Bank has the following balance sheet (in millions), with the risk weights in parentheses. In
Question:
Third Fifth Bank has the following balance sheet (in millions), with the risk weights in parentheses.
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In addition, the bank has $ 20 million in commercial direct-credit substitute standby letters of credit to a public corporation and $ 40 million in 10-year FX forward contracts that are in the money by $ 1 million.
a. What are the risk-adjusted on-balance-sheet assets of the bank as defined under the Basel III?
b. What is the CET1, Tier I, and total capital required for both off-and on-balance- sheet assets?
c. Disregarding the capital conservation buffer, does the bank have sufficient capital to meet the Basel requirements? How much in excess? How much short?
d. Does the bank have enough capital to meet the Basel requirements, including the capital conservation buffer requirement? If not, what minimum CET1, additional Tier 1, or total capital does it need to meet the requirement?
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
a b c No the bank does not have sufficient total capital to meet the Basel requirements It needs CET...View the full answer
Financial Markets and Institutions
ISBN: 978-0077861667
6th edition
Authors: Anthony Saunders, Marcia Cornett
