Consider a bank that initially has the following balance sheet:
|
Assets ($millions)
|
Liabilities ($millions)
|
|
Reserves
|
120
|
Deposits
|
1000
|
|
Loans
|
1000
|
Borrowings
|
300
|
|
Securities
|
280
|
Bank Capital
|
100
|
a) Suppose that Donald Trump withdraws $30 million of deposits from this bank. If the bank faces a required reserve ratio of 10%, what actions can the bank take to bring it back into compliance with its reserve requirements?
b) Suppose that the bank's regulators required the bank to raise its bank capital/assets ratio. How can the bank accomplish this?