FRM Part I · FRM Exam Part I · Banks
A bank has CET1 capital of $60 million, Additional Tier 1 capital of $20 million, Tier 2 capital of $30 million, and risk-weighted assets of $800 million. What is the bank's Tier 1 capital ratio?
The Tier 1 capital ratio is 10.00%. Tier 1 capital is CET1 plus Additional Tier 1, which is $80 million, and dividing by risk-weighted assets of $800 million gives 10 percent. Tier 2 capital is excluded from Tier 1.
- A7.50%
- B10.00%Correct
- C11.25%
- D13.75%
Explanation
Tier 1 capital = CET1 + AT1 = 60 + 20 = $80 million. Dividing by RWA of $800 million gives 10.00%. The 7.50% option uses CET1 only, and 13.75% uses total capital including Tier 2 (110/800).
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