Eastern Bank, a commercial bank located in Boston, has interviewed you for a position in their compliance and risk department. During the interview, you were told that one of the duties of the position would be to "perform risk-weighting of assets for purposes of calculating the risk-based capital ratio of the bank." You were told these calculations would be performed in accordance with regulations of the FDIC - Eastern Bank's primary federal regulator.
In atwo-page memo,
Explain what a total risk-based capital ratio is, including why it is important for regulatory purposes;
Describe what the process is for calculating it;
Identify the applicable regulation (i.e., C.F.R. section); and
Identify what Eastern Bank's total risk-based capital ratio is (Hint: Use the FDIC's Institution Directory, locate Eastern Bank and search "Performance and Condition Ratios" under the ID Report Selections.)