The following table is the balance sheet for Bank A: (5) Calculate the total cap

Question

The following table is the balance sheet for Bank A:

(5) Calculate the total capital. (6) Calculate CET1(Common Equity Tier 1)/ Credit risk adjusted assets (7)Tier II / Credit risk adjusted assets (8)Total capital / Credit risk adjusted asset

Assets value Risk Weight Factors Cash 120 0% U.S Treasury Securities 240 0% Bank Reserves 60 0% U.S Gov't Agency Securities 20 20% Mortgage Loans 350 50% Consumer Loans 150 100 Construction Loans 10 100 Corp Debt Securities 50 100 TOTAL 1000 Liabilites & Equities Transaction Deposits 700 Saving Accounts 100 Negoitated CDs 50 Repos 70 Subordinated Debt 20 TOTAL Liabilities 940 Common Equity 30 Retained Earnings 15 Preferred Stocks 15 TOTAL Equity 60

Explanation / Answer

Common Equity Tier 1 = Common Equity + Retained Earnings

= 30 + 15 = 45

Total Capital = Common Equity + Retained Earnings + Preferred Stock

= 30 + 15 + 15 = 60

Tier II Capital = Tier I Capital + Preferred Stocks + Subordinated Debt

= 45 + 15 + 20 = 80

Credit risk adjusted assets:

Answer 5) Total capital = 60

Answer 6) CET1(Common Equity Tier 1)/ Credit risk adjusted assets = 45 / 389 = 11.57%

Answer 7) Tier II / Credit risk adjusted assets = 80 / 389 = 20.57%

Answer 8) Total capital / Credit risk adjusted asset = 60 / 389 = 15.42%

Assets value Risk Weight Factors Risk adjusted value A B A x B Cash 120 0% 0 U.S Treasury Securities 240 0% 0 Bank Reserves 60 0% 0 U.S Gov't Agency Securities 20 20% 4 Mortgage Loans 350 50% 175 Consumer Loans 150 100% 150 Construction Loans 10 100% 10 Corp Debt Securities 50 100% 50 Total 389

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