Question

A bank’s balance sheet information is shown below (in $000).

On Balance Sheet Items	Face Value
Cash	$	141,600
Short-term government securities (<92 days)		7,400
Long-term government securities (>92 days)		434,400
Federal Reserve stock		11,800
Repos secured by federal agencies		179,000
Claims on U.S. depository institutions		957,900
Loans to foreign banks, OECD CRC rated 2		1,840,000
General obligation municipals		190,000
Claims on or guaranteed by federal agencies		28,500
Municipal revenue bonds		132,900
Residential mortgages, category 1, loan-to-value ratio 75%		7,000,000
Commercial loans		6,667,669
Loans to sovereigns, OECD CRC rated 3		13,600
Premises and equipment		475,000

Off Balance Sheet Items:	Conversion Factor (%)		Face Value
U.S. Government Counterparty
Loan commitments:
<1 year	20		$	300
1–5 year	50			1,140
Standby letters of credit:
Performance-related	50			200
Direct-credit substitute	100			100
U.S. Depository Institutions Counterparty
Loan commitments:
<1 year	20			100
>1 year	50			3,000
Standby letters of credit:
Performance-related	50			200
Direct-credit substitute	100			56,400
Commercial letters of credit:	20			400
State and Local Government Counterparty (revenue municipals)
Loan commitments:
>1 year	50			100
Standby letters of credit:
Performance-related	50			135,400
Corporate Customer Counterparty
Loan commitments:
<1 year	20			3,212,400
>1 year	50			3,046,278
Standby letters of credit:
Performance-related	50			101,543
Direct-credit substitute	100			490,900
Commercial letters of credit:	20			78,978
Sovereign Counterparty
Loan commitments, OECD CRC rated 1:
<1 year	20			110,500
>1 year	50			1,225,400
Sovereign Counterparty
Loan commitments, OECD CRC rated 2:
<1 year	20			85,000
>1 year	50			115,500
Sovereign Counterparty
Loan commitments, OECD CRC rated 7:
>1 year	50			30,000
Interest rate market contracts (current exposure assumed to be zero):
<1 year (notional amount)	0			2,000
>1–5 year (notional amount)	0.5			5,000

What is the bank’s risk-adjusted asset base? (Round your answer to the nearest whole dollar amount. (e.g., 32))

Answer 1

bank’s risk-adjusted asset base

Total bank adjusted Asset base

On-balance-sheet risk-adjusted asset base +Off-balance-sheet risk-adjusted asset base

=$14,161,055=11354999+2806056

(value in '000)

I have used standard norms for weight of risk as it is not stated in the question i advise you to use any specific rate quoted in your question otherwise standard rates are fine.

Step1 On balance sheet

I have attached three snapshot of the solution please download.

Step 2 Off balance sheet1

Step 3 Off balance sheet 2

I am giving picture of reference from my source however i advise use your text book for it.it is only for reference .