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Bank B
Reserves 1718910
T.A 198732000 T.L&Eq= 198732000
1- Calculate the capital adequacy ratio for each bank
2- Which bank is better if you know that Basel Committee on Banking Supervision
requires banks to hold at least 10% of CAR
3- Give your recommendation for the inefficient bank by mentioning 4 different
methods of increasing CAR ratio
4- If you know that bank B is concentrating its loans on a few number of clients,
what do you think is the
Asset Risk Weight solution of such issue?
Non-risky assets 0% Given that the risk weight
Corporate loans 20% categories as following:
Governmental loans 20%
Other bank loans 20%
Collateralized loans 50%
Securities 50%
Other assets 100%
Answer
Bank A
Asset Risk Weight Category Risk Weight of asset
Cash 0% 0
Treasury bills 0% 0
Financial trading 20000000*50% 10000000
securities
Customer loans 29000000*50% 14500000
Governmental loans 14298000*20% 2859600
Real estate loans 9363000*50% 4681500
Loans to other banks 18050000*20% 3610000
Other assets 63819000*100% 63819000
Total 99470100
Bank B
Asset Risk weight category Risk weight of asset
Cash 0 0
Treasury bills 0 0
Financial securities 18632000*50% 9316000
Customer loans 36732000*50% 18366000
Corporate loans 17000000*20% 3400000
Real estate loans 22396000*50% 11198000
Other assets 49700000*100% 49700000
Total 91980000