What is the contribution to the asset base of the following items under the Base

Question

What is the contribution to the asset base of the following items under the Basel III requirements? (Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in dollars not in millions.) $5 million cash reserves. $30 million 91-day U.S. Treasury bills. $15 million cash items in the process of collection. $3 million U.K. government bonds, OECD CRD rated 1. $3 million French short-term government bonds, OECD CRD rated 2. $1 million general obligation bonds. $20 million repurchase agreements (against U.S. Treasuries). $3 million loan to foreign bank, OECD rated 3. $300 million 1-4 family home mortgages, category 1, loan-to-value ratio 80%. $5 million 1-4 family home mortgages, category 2, loan-to-value ratio 95%. $3 million 1-4 family home mortgages, 100 days past due. $300 million commercial and industrial loans, AAA rated. $300 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. $5 million commercial letter of credit to a foreign bank, OECD CRC rated 2. $1 million five-year loan commitment to a foreign government, OECD CRC rated 1. $4 million bankers' acceptance conveyed to a U.S., AA rated corporation. $18 million three-year loan commitment to a private agent. $18 million three-month loan commitment to a private agent. $36 million standby letter of credit to back an A rated corporate issue of commercial paper. $6 million five-year interest rate swap with no current exposure. $9 million two-year currency swap with $800, 000 current exposure.

Explanation / Answer

Part a)

Cash reserves are not considered in asset base, so its contribution would be zero.

Part b)

US treasury bills are also not considered in asset base, so its contribution would be zero.

Part C)

Cash items in the process of collection receives 20% weightage in the asset base. Therefore, its contribution would be:

Contribution = 15 million x 20%

                          = 3 million

Part d)

Foreign government bonds receive 20% weightage in the asset base. Therefore, its contribution would be:

Contribution = 3 million x 20%

                                = 0.60 million

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