A bank's balance sheet information is shown below. Value On Balance Sheet Items Cash Category Face Value Weight 1 Short-term government securities (92 days) $121,600 0% 1 Long-term government securities (>92 days) 5.400 0% 1 Federal Reserve stock 414,400 0% 1 Repos secured by federal agencies 9,800 0% 2 Claims on U.S. depository institutions 159,000 20% 2 937.900 20% Short-term (lyr.) 5,800 100% The risk-adjusted asset base under Basel II is $7,294,630 SO SO SO $0 $31,800 $187.580 $328.000 $34,000 $5,300 $56,450 $6,645,700 $5,800 3 $7,886,530 $9,857,529 None of the answers are correct

Based ll is a second international banking regulatory accord that is based on three main pillars: minimal capital requirements, regulatory supervision, and market discipline . Minimal capital requirements play the most important role in Basel ll and obligate banks to maintain minmum capital ratios of regulatory capital over risk – weighted assets.

Important part in Basel ll is refining the definition of risk – weighted assets, which are used as a denominator in regulatory capital ratios, and are calculated by using the sum of assets that are multiplied by respective risk weights for each asset type . The risker the asset, the higher its weight. The notion of risk – weighted assets is intended topunish banks for holding risky assets , which significantly increases risk – weighted assets and lowers regulatory capital raios

CALCULATION OF RISK WEIGHTED ASSETS UNDER BASEL ll

Hence Option 1 is Correct i.e. $7294630