Consider a bank with the following balance sheet:
|Assets||Liabilities & Capital|
|Required Reserves||$20 million||Checkable deposits||$250 million|
|Excess reserves||48 million|
Try to write an academic paper with us
Click order now button to get the answer for your question
|Commercial loans||$100 million||Bank capital||$18 million|
Assume the required reserve ratio is 8%. The bank enters into agreements to make loan commitments of $30 million to various commercial customers.
a) Calculate the bank’s capital to asset ratio before and after the agreements. Does the bank meet the minimum capital ratio of 4%?
b) Calculate the bank’s capital to risk-weighted asset ratio before and after the agreements.