Sigma Bank Has the Following Balance Sheet in Millions of Dollars.Unless

question 73

Multiple Choice

Sigma Bank has the following balance sheet in millions of dollars.Unless mentioned otherwise, all assets are associated with corporate customers (not governments or sovereigns) .Values are in millions of dollars.Refer to table 20-8 for appropriate risk weights. $$\begin{array} { | l | r | l | r | } \hline \text { Cash } & \$ 40 & \text { Deposits } & \$ 370 \\\hline \begin{array} { l } \text { Municipal General } \\\text { Obligation Bonds }\end{array} & \$ 60 & & \\\hline \begin{array} { l } \text { Residential Mortgages } \\\text { 1-4 family } \\\left( 80 \% { - 90\% } \text { LTV } \right) \end{array} & \$ 100 & \begin{array} { l } \text { Perpetual Preferred } \\\text { Stock }\end{array} & \$ 20 \\\hline \begin{array} { l } \text { Commercial loans } \\\text { BB + rated }\end{array} & \$ 200 & \text { Equity } & \$10\\\hline \text { Total Assets } & \$ 400 & & \$ 400 \\\hline\end{array}$$ Off balance sheet contingent liabilities (Refer to Table 20-10) $40 million direct-credit substitute standby letters of credit issued to a U.S.corporation.
$40 million commercial letters of credit issued to a corporation
Off-balance sheet derivatives (Refer to Table 20-11)
$200 million 10-year interest rate swaps
$100 million 2-year forward DM contracts
Is the bank adequately capitalized for its on-balance-sheet assets based on the Basel standards?

• A)Yes, because both Tier I and Tier II capital each exceed the required minimum.
• B)Yes, because both the Tier I and Tier II combined exceeds the required minimum.
• C)No, because both Tier I and Tier II capital each are below the required minimum.
• D)No, because Tier I is below the required minimum while Tier II exceeds the required minimum.
• E)No, because Tier I is above the required minimum while Tier II is below the required minimum.

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