Question

What is the contribution to the asset base of the following items under the Basel III requirements? (LG 13-7)

$10 million cash reserves.

$50 million 91-day U.S. Treasury bills.

$25 million cash items in the process of collection.

$5 million UK government bonds, OECD CRD rated 1.

$5 million French short-term government bonds, OECD CRD rated 2.

$1 million general obligation bonds.

$40 million repurchase agreements (against U.S. Treasuries).

$2 million loan to foreign bank, OECD rated 3.

$500 million 1–4 family home mortgages, category 1, loan-to-value ratio 80 percent.

$10 million 1–4 family home mortgages, category 2, loan-to-value ratio 95 percent.

$5 million 1–4 family home mortgages, 100 days past due.

$500 million commercial and industrial loans, AAA rated.

$500 million commercial and industrial loans, B- rated.

$100,000 performance-related standby letters of credit to a AAA rated corporation.

$100,000 performance-related standby letters of credit to a municipality issuing general obligation bonds. $7 million commercial letter of credit to a foreign bank, OECD CRC rated 2.

$3 million five-year loan commitment to a foreign government, OECD CRC rated 1.

$8 million bankers’ acceptance conveyed to a U.S. AA rated corporation.

$17 million three-year loan commitment to a private agent.

$17 million three-month loan commitment to a private agent.

$30 million standby letter of credit to back an A rated corporate issue of commercial paper.

$4 million five-year interest rate swap with no current exposure.

$6 million two-year currency swap with $500,000 current exposure.

Answer 1

It's a simple fact based question.There is nothing much to explain. Please see the table below. The last column contains your answer line item by line item and the last row is the total contribution.

Parameter	Credit equivalent amount, if aplicable	Risk Weight	Contribution ($)
$10 million cash reserves.		0%	-
$50 million 91-day U.S. Treasury bills.		0%	-
$25 million cash items in the process of collection.		20%	5,000,000
$5 million UK government bonds, OECD CRD rated 1.		0%	-
$5 million French short-term government bonds, OECD CRD rated 2.		20%	1,000,000
$1 million general obligation bonds.		20%	200,000
$40 million repurchase agreements (against U.S. Treasuries).		20%	8,000,000
$2 million loan to foreign bank, OECD rated 3.		50%	1,000,000
$500 million 1–4 family home mortgages, category 1, loan-to-value ratio 80 percent.		50%	250,000,000
$10 million 1–4 family home mortgages, category 2, loan-to-value ratio 95 percent.		200%	20,000,000
$5 million 1–4 family home mortgages, 100 days past due.		150%	7,500,000
$500 million commercial and industrial loans, AAA rated.		100%	500,000,000
$500 million commercial and industrial loans, B- rated.		100%	500,000,000
$100,000 performance-related standby letters of credit to a AAA rated corporation.	50%	100%	50,000
$100,000 performance-related standby letters of credit to a municipality issuing general obligation bonds.	50%	20%	10,000
$7 million commercial letter of credit to a foreign bank, OECD CRC rated 2.	20%	20%	280,000
$3 million five-year loan commitment to a foreign government, OECD CRC rated 1.	50%	0%	-
$8 million bankers’ acceptance conveyed to a U.S. AA rated corporation.	20%	100%	1,600,000
$17 million three-year loan commitment to a private agent.	50%	100%	8,500,000
$17 million three-month loan commitment to a private agent.	20%	100%	3,400,000
$30 million standby letter of credit to back an A rated corporate issue of commercial paper.	100%	100%	30,000,000
$4 million five-year interest rate swap with no current exposure.	0.5% x max exposure + current exposure	20,000
$6 million two-year currency swap with $500,000 current exposure.	5% x max exposure + current exposure	800,000
Total			1,337,360,000