Basel Accord- Risk-weighted assets and risk-based capital requirements Consider the balance sheet of a bank below. Use the risk-weight Table set by the Basel Accord (below) to answer the questions. Assets Liabilities Reserves Money Market Deposits 92 m Capital 8m T-bills Mortgages (commercial) Commercial Loans 10 m 40 m 30 m 20 m 1. What is the capital ratio of this bank? 2. Calculate the risk-weighted asset amount. 3. What is the risk-based capital ratio? 4. Does the bank meet the 8% risk-based capital ratio requirement? Assets Table: Four categories of assets and their risk weight Cash/reserves/govt securities Bank/OECD loans Muni bonds/residential mortgages Commercial loans/commercial mortgages/consumer loans Risk-weight 0% 20% 50% 100%

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.