A bank has currently the following balance sheet structure: (4 marks) ...
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Finance
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 |
- Calculate RWA for on-balance-sheet items.
- Calculate RWA for off-balance-sheet items.
- Calculate Total RWA for the bank.
- According to the Basel I capital requirements, is the bank adequately capitalized?
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