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Let’s assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts.

Cash                                                    7 million

Government Securities:                       9 million

Mortgage loans                                   25 million

Other loans                                          55 million

Fixed assets                                         8 million

Intangile assets                                    5 million

Loan-loss reserves                               4 million

Owners’ equity                                   6 million

Trust-preferred securities                    3 million

Cash assets and government securities are not considered risky.

Loans secured by real estate have a 50% weighting factor.

All other loans have a 100 % weighting factor in term of riskiness.

Calculate the equity capital ratio.

Calculate the Tier 1 Ratio using risk-adjusted assets.

Calculate the Total Capital (Tier 1 and Tier 2) Ratio using risk-based assets.

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M91378151

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