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 A bank has computed its Tier I capital - Rs. 1000 Crores. Tier-II Capital - Rs 1200 Crores. RWAs for Credit Risk - Rs 15,000 Crores. Capital charge for market risk - Rs 600 Crores. Capital charge for operational risk - Rs 400 Crores. What would be the bank's total RWAs? a. 18,889 Crores b. 21,161 Crores c. 26,111 Crores d. 26,141 Crores Ans - c Solution : RWAs for Credit Risk = Rs 15,000 Crores RWAs for Market Risk = Rs 600/.09 = Rs 6,667 Crores RWAs for Operational Risk = Rs 400/.09 = Rs 4,444 Crores Total RWAs = 15000+6667+4444 = Rs 26,111 Crores Tier I Capital = Rs 1,000 Crores Tier II Capital = Rs 1,200 Crores Total Capital = Rs 2,000 Crores Maximum tier II capital that can be taken into account for the purpose of CRAR is 100% of tier I capital. Tier-I CRAR = (Eligible Tier I capital funds) - (Total RWAs) = 1000/26111 = 3.83%. Total CRAR = (Eligible total capital funds) - (Total RWAs) = 2000/26111 = 7.66%. It may be noted that tier I capital of the bank is less than required level. ............................................. ABC Bank has provideded following details : 1- Tier 1 Capital = Rs.2000cr 2- Tier 2 Capitalv =Rs.1000cr 3- Risk weighted assets for credit risk = Rs.20000cr 4- Capital charge for market risk = Rs.1000cr 5- Capital charge for operational risk = Rs.600cr Based on the given information, 1. Calculate the amount of total risk weighted assets, if the CAR is 9%; Total risk weighted assets = RWA for credit risk + RWA for market risk + RWA for opperational risk = 20000 + 1000/0.09 + 600 / 0.09 = 20000 + 11112 + 6667 = 37779 cr. 2. Calculate the amount of Tier 1 Capital adequacy ratio of the bank RWA for credit risk + RWA for market risk + RWA for operational risk = 20000 + 1000 /0.09 + 600 / 0.09 =20000 + 11112 + 6667 = 37779cr. Tier 1 Capital = 2000 Tier 1 Capital adequacy ratio = Eligible Tier 1/Total RWA = 2000/ 37779 = 5.29% 3. Calculate the total Capital to risk assets ratio; RWA for credit risk + RWA for market risk + RWA for opperational risk = 20000 + 1000 /0.09 + 600 / 0.09 =20000 + 11112 + 6667 = 37779cr. Tier 1 Capital = 2000 Tier 2 Capital = 2400 Total = 4000 (Tier 2 cannot be more than Tier 1. Hence maximum it can be taken is 2000cr). Total Capital funds = Eligible total capital fund / Total RWA = 4000/ 37779 = 10.59% ……………………………………………………………………………………………………………………………………………

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