Assume that New Bank's risk-based capital requirement is 8% and that mortgage loans are in the...
Assume that New Bank's risk-based capital requirement is 8% and
that mortgage loans are in the 50 percent
risk weight category for capital regulation purposes. New Bank has
$30 million in home mortgage loans. What
amount of capital must the bank maintain, against this portfolio of
mortgages?
Homework Answers
Home mortgage loans given by New Bank is its assets. As per regulations this asset falls under 50% risk weighting. This $30m * 50% = $15m assets.
New Bank is required to maintain capital of $15m * 8% = $1.2m
Ans $ 1.20 million
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