4. A commercial bank has provided the balance sheet below. It has no off-balance sheet activities. Corporate bonds have

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4 A Commercial Bank Has Provided The Balance Sheet Below It Has No Off Balance Sheet Activities Corporate Bonds Have 1 (34.21 KiB) Viewed 30 times

4. A commercial bank has provided the balance sheet below. It has no off-balance sheet activities. Corporate bonds have a 100% loan-to-value risk weight and residential mortgages have a 50% loan- to-value risk weight Assets (5 millions) Liabilities and Equity (5 millions) Cash $ 85 Deposits $ 1,465 U.S. Treasury securities 153 Subordinated debentures 32 Corporate bonds 459 Common stock 34 Residential mortgages 865 Retained earnings 31 Total Assets $ 1,562 Total Liabilities and Equity $ 1,562 a. Calculate each of the following ratios. For each ratio, also explain which capital category zone the bank falls into. (4 points each) i. CET1 risk based capital ratio li. Tier I risk-based capital ratio lii. Total risk-based capital ratio iv. Tier I leverage ratio b. Given your calculations and the capital categories in a., what prompt corrective actions will be required of the bank by its regulators? Explain. (4 points)