Star Bank has estimated that its average VAR over the last 60 days was £35.5 million. The DEAR of the previous day was £30.2 million. Under the latest BIS standards. a) Determine the amount of capital to be held for market risk. b) The bank has £15 million of Tier 1 capital, £37.5 million of Tier 2 capital and £54 million of Tier 3 capital. Is the capital sufficient? If not, what minimum amount and type of new capital should be raised? (Note that capital can be raised from any type subject to Tier 3 capital is limited to 250% of Tier 1 and Tier 2 can be substituted for Tier 3 up to the same 250% limit.)

Star Bank has estimated that its average VAR over the last 60 days was £35.5 million. The DEAR of the previous day was £30.2 million. Under the latest BIS standards. a) Determine the amount of capital to be held for market risk. b) The bank has £15 million of Tier 1 capital, £37.5 million of Tier 2 capital and £54 million of Tier 3 capital. Is the capital sufficient? If not, what minimum amount and type of new capital should be raised? (Note that capital can be raised from any type subject to Tier 3 capital is limited to 250% of Tier 1 and Tier 2 can be substituted for Tier 3 up to the same 250% limit.)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter23: Other Topics In Working Capital Management

Section: Chapter Questions

Problem 11MC

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