Capital Ratio Computations For Depository Institutions

Capital ratios are key metrics for bank management and regulators. This 90-minute webinar on capital ratio computations explains how scarce capital is for banks and bank holding companies, how highly leveraged they are and how little of their own money owners have at stake, using Call Report ratios to show it.

After a brief explanation of Basel III, you'll review actual and required ratios and the process for computing the four key ratios: the CET1 capital ratio, Tier 1 capital ratio, total capital ratio and Tier 1 leverage ratio. A walkthrough of Schedule RC-R shows which lines feed each numerator and denominator.

The session also explains important items within those figures, the risk-weighting approach for assets and off-balance sheet items, and the five capitalization categories.

• Assess how scarce capital is at the largest U.S. banks
• Name the four key Basel III ratios and their components
• Compute the CET1, Tier 1, total capital and Tier 1 leverage ratios
• Identify the Schedule RC-R lines used for each numerator and denominator
• Apply the risk-weighting approach to assets and off-balance sheet items
• Describe the five capitalization categories

• The scarce capital situation in U.S. banking
• A brief explanation of Basel III
• Actual and required Basel III ratios
• How to compute the four key ratios
• Walkthrough of Schedule RC-R, focusing on numerators and denominators
• Important items in the numerators and denominators
• Risk-weighting of assets and off-balance sheet items in the denominator
• How many banks are well capitalized and the five capitalization categories

Capital ratios drive both management decisions and regulatory views of a bank, so the people who prepare, review and oversee Call Reports need to understand how they are built.

This session suits senior management, board directors and financial experts, Call Report preparers and reviewers, controllers' staff, regulators, internal and external auditors, risk managers, corporate counsel, and both newcomers and seasoned bankers.

• Controllers personnel
• Call Report preparers – new and experienced
• Call Report reviewers
• Regulators
• Internal auditors
• External auditors
• Risk managers
• Corporate counsel
• Senior management
• Directors

Paul J. Sanchez, CPA, CBA, CFSA, CGMA conducts a small CPA practice in Port Washington, New York. He is also the owner of Professional Service Associates (PSA), a consulting and professional training and development business servicing corporate clients (auditors, controllers, etc.), CPA firms, professional associations and others. He was an assistant professor at Long Island University - C.W. Post Campus as well as an adjunct lecturer at City University of New York. Prior to starting PSA, he was the Vice President-Professional Development for the Audit Division of a regional bank and Director of Professional Practices and Vice President of a money-center bank, where he directed the professional practice development and training for internal auditors. He also was on the technical staff of the Auditing Standards and Examinations Divisions of the AICPA. He practiced public accounting in the New York office of Deloitte where he also was a firm recruiter and in-house professional development instructor. He was an owner and auditing and accounting seminar leader for the Person/Wolinsky CPA Review Courses, a company that prepared candidates to pass the Uniform CPA Examination. He is a frequent lecturer and seminar leader for accounting, auditing, banking, risk assessment and other professional presentations. He is the author of the textbook, “Accounting Basics for Community Financial Institutions” (Financial Managers Society, 2nd edition, Chicago, 2009) and the “Ideas an Analysis Letter: The Sanchez Take” (see www.sanchez-psa.com). As a contributing author, his chapter on ‘An Auditor’s Approach to Risk-Based Auditing: What to Audit and When,’ is included in the textbook, “Effective Auditing for Corporates: Key Developments in Practice and Procedures,” (Bloomsbury Information, Ltd, London, 2012).