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For this exercise, refer to the material on capital management in Section 3.8 of the text as needed. Access your bank’s financial statements on Yahoo!Finance http://finance.yahoo.com*, the SEC website, or the bank’s own website. From the balance sheet/aka “Statement of Financial Condition” for the most recent fiscal year available, find the amount of the bank’s common equity (common stock + capital surplus + retained earnings –Treasury stock) and its total assets. Compute the bank’s common equity capital ratio = common equity/total assets x 100%. Does this amount seem to be adequate protection against the bank’s insolvency in the event of another financial crisis? Why or why not?

Following the Basel III accord and Dodd-Frank legislation, banks with international operations have to maintain much stricter capital adequacy ratios, as assets are adjusted for risk. In order to be “adequately capitalized” a bank needs a total capital ratio of 9.68%. Based on the guide for risk-adjusted assets shown in the text, does your bank make the grade? (Note: If you are unable to calculate the adjusted amount for assets, at least you know that it will be smaller than the “total assets” used in the previous calculation. Thus the ratio will be larger. So if you made the 9.68% threshold before, you may assume that your bank is “adequately capitalized” based on the new rules!) Please name your Word or Excel file “yourlastname_ch3” and submit to this dropbox.

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