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Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition by Youssef F. Bissada, Jean Dermine

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Solution to Stage Six

1:
Assets Liabilities and shareholders’ equity
Reserves with central bank60Demand deposits750
Mortgage loans525Term deposits450
Corporate loans450Interbank deposits370
Interbank loans375Subordinated debt25
Government bonds195Equity55
Fixed assets45  
Total1650Total1650

The risk-weighted assets (RWA) are calculated as follows:

RWA = 0% × (60 + 195) + 20% × (375) + 50% × (525) + 100% × (450 + 45) = 832.5

Tier 1 capital: 55/832.5 = 6.61%

Tier 2 capital: 25/832.5 = 3.0%

BIS capital ratio = Tier 1 + Tier 2 = 6.61% + 3.0% = 9.61%

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