The following is the balance sheet numbers reported by Bay Bank for 2020. Based on Basel 1 standards, are the banks adequately capitalized? (in millions) US Treasury Bonds$25Deposits $297.00Municipal Bonds$15 Mortgages$75Bonds (Tier 2 Capital)$8.00Loans$200Equity (Tier 1 Capital)$10.00Total$315 $315.00 Yes, they have sufficient Tier 1 and Tier 1+2 capital No, they do not have sufficient Tier 1 or Tier 1+2 capital No, they have sufficient Tier 1 but insufficient Tier 1+2 capital No, they do have sufficient Tier 1+2 capital but insufficient Tier 1 capital

Bonds (Tier 2 Capital) : In this context , bonds refer to debt instruments that the bank has issued…

Answered: The following is the balance sheet…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter15: Contracting, Governance, And Organizational Form

Section: Chapter Questions

Problem 4E

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The following is the balance sheet numbers reported by Bay Bank for 2020. Based on Basel 1 standards, are the banks adequately capitalized?

(in millions)
US Treasury Bonds	$25	Deposits		$297.00
Municipal Bonds	$15
Mortgages	$75	Bonds (Tier 2 Capital)	$8.00
Loans	$200	Equity (Tier 1 Capital)	$10.00
Total	$315			$315.00

		Yes, they have sufficient Tier 1 and Tier 1+2 capital
		No, they do not have sufficient Tier 1 or Tier 1+2 capital
		No, they have sufficient Tier 1 but insufficient Tier 1+2 capital
		No, they do have sufficient Tier 1+2 capital but insufficient Tier 1 capital

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