Answered>Order 1320

Bank A has a 10 percent capital ratio and uses a large proportion of its assets to invest in very highly-rated bonds. Bank B has an 12 percent capital ratio and uses a large proportion of its assets to invest in highly leveraged transactions. How would Bank A rate versus Bank B using the capital and asset quality criteria?

A. Bank B is perceived as safer according to capital, but more risky according to asset quality.

B. Bank B is perceived as safer by both criteria.

C. Bank A is perceived as safer by both criteria.

D.  Bank A is perceived as safer according to capital, but more risky according to asset quality.