Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition

Solution to Stage Six

1:

Assets   Liabilities and shareholders’ equity Reserves with central bank 60 Demand deposits 750 Mortgage loans 525 Term deposits 450 Corporate loans 450 Interbank deposits 370 Interbank loans 375 Subordinated debt 25 Government bonds 195 Equity 55 Fixed assets 45     Total 1650 Total 1650 The risk-weighted assets (RWA) are calculated as follows: RWA = 0% × (60 + 195) + 20% × (375) + 50% × (525) + 100% × (450 + 45) = 832.5 Tier 1 capital: 55/832.5 = 6.61% Tier 2 capital: 25/832.5 = 3.0% BIS capital ratio = Tier 1 + Tier 2 = 6.61% + 3.0% = 9.61%