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CAIIB-BFM-CASE STUDIES


ABC Bank has provided following details :

1- Tier 1 Capital = Rs.4500cr
2- Tier 2 Capital = Rs.4000cr.
3- Capital charge for market credit risk = Rs.2400cr
4- Capital charge for market risk = Rs.1600cr
5- Capital charge for operational risk = Rs.800cr

1) Based on the given information, please calculate the amount of total risk weighted assets, if the CAR is 8%;

Total risk weighted assets = RWA for credit risk + RWA for market risk + RWA for opperational risk

= 2400/0.08 + 1600/0.08 + 800/0.08 = 30000 + 20000 + 10000 = 60000 cr

2) Based on the given information, please calculate the amount of Tier 1 Capital adequacy ratio of the bank

Total risk weighted assets = RWA for credit risk + RWA for market risk + RWA for opperational risk
= 2400/0.08 + 1600/0.08 + 800/0.08 = 30000 + 20000 + 10000 = 60000 cr

Tier 1 Capital = 4500

Tier 1 Capital adequacy ratio = Eligible Tier 1/Total RWA = 4500/60000 = 7.5%

3) Based on the given information, please calculate the amount of Tier 2 Capital adequacy ratio of the bank

Total risk weighted assets = RWA for credit risk + RWA for market risk + RWA for opperational risk
= 2400/0.08 + 1600/0.08 + 800/0.08 = 30000 + 20000 + 10000 = 60000 cr

Tier 2 Capital = 4000

Tier 2 Capital adequacy ratio = Eligible Tier 2/Total RWA = 4000/60000 = 6.66%

4) Based on the given information, please calculate the total Capital to risk assets ratio;

Total risk weighted assets = RWA for credit risk + RWA for market risk + RWA for opperational risk
= 2400/0.08 + 1600/0.08 + 800/0.08 = 30000 + 20000 + 10000 = 60000 cr

Tier 1 Capital = 4500
Tier 2 Capital = 4000
Total = 8500

Total Capital to risk assets ratio = Eligible total capital fund / Total RWA = 8500/60000 = 14.17%

-------------------------------------------------


ABC Bank has provided following details :

1- Tier 1 Capital = Rs.2000cr
2- Tier 2 Capital = Rs.2400cr.
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

1) Based on the given information, please 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 = 37779cr.

2) Based on the given information, please calculate the amount of Tier 1 Capital adequacy ratio of the bank

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 = 37779cr

Tier 1 Capital = 2000
Tier 2 Capital = 2400
Total = 4000 (Tier 2 cannot be Tier 1)

Tier 1 Capital adequacy ratio = Eligible Tier 1/Total RWA = 2000/37779 = 5.29%

3) Based on the given information, please calculate the total Capital to risk assets ratio;

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 = 37779cr

Tier 1 Capital = 2000
Tier 2 Capital = 2400
Total = 4000 (Tier 2 cannot be Tier 1.Hence maximum it can be taken is 2000cr).

Total Capital to risk assets ratio = Eligible total capital fund / Total RWA = 4000/37779 = 10.59%

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