Question

A bank has Tier I capital of $90 million and Tier II capital of $70 million. The bank has total assets of $2,522 million and risk-weighted assets of 2,017.6 million. This bank is:_______.
A. Critically under-capitalized.
B. Significantly under-capitalized.
C. Under-capitalized.
D. Adequately capitalizede.

Answer 1

Answer:

C. Under-capitalized

Explanation:

Tier Capital/Risk-weighted assets = (90 million + 70 million)/2,017.6 million

= 7.93%;

Tier 1 Capital /Risk-weighted assets = 90 million /2,017.6 million

= 4.46%;

Tier Capital/Total assets= (90 million + 70 million)/2,522 million

= 6.34%.

The first ratio puts the bank in the undercapitalized zone.