Basel III: Global Regulatory Standard
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Questions and Answers

What is the minimum total capital ratio of risk-weighted assets?

  • 12.5%
  • 10.0%
  • 10.5% (correct)
  • 8.0%

    • What is included in Common Equity Tier 1 (CET1) Capital?

  • Paid-up Common Stock, Common Stock Dividends, and Retained Earnings
  • Paid-up Common Stock, Additional Paid-in Capital, and Deposits for Common Subscription
  • Paid-up Common Stock, Common Stock Dividends, and Undivided Profits
  • All of the above (correct)

    • What is the minimum Common Equity Tier 1 (CET1) Capital ratio of risk-weighted assets?

  • 7.5%
  • 4.5% (correct)
  • 6.0%
  • 8.0%

    • What is the purpose of the Capital Conservation Buffer?

    <p>All of the above</p> Signup and view all the answers

    What is the main objective of the Loss Absorbency feature in Tier 1 and Tier 2 capital instruments?

    <p>To ensure that banks can fully absorb losses before government bailout</p> Signup and view all the answers

    What is the main purpose of the Internal Capital Adequacy Assessment Process (ICAAP)?

    <p>To assess capital adequacy relative to risk profile</p> Signup and view all the answers

    What is the minimum maturity requirement for Tier 2 Capital instruments?

    <p>5 years</p> Signup and view all the answers

    What is the purpose of the Regulatory Adjustments to Common Equity Tier 1 (CET1) Capital?

    <p>To deduct specific items from CET1 Capital</p> Signup and view all the answers

    What is the main objective of the Capital Buffers?

    <p>All of the above</p> Signup and view all the answers

    What is the purpose of the Countercyclical Capital Buffer?

    <p>Not mentioned in the text</p> Signup and view all the answers

    Which risk weighting is assigned to equity exposures not deducted from capital and listed on a recognized exchange?

    <p>300%</p> Signup and view all the answers

    What is primarily included in Tier 1 Capital?

    <p>Common equity and retained earnings</p> Signup and view all the answers

    Which ratio is introduced to ensure banks have adequate levels of liquid assets to meet short-term obligations?

    <p>Liquidity Coverage Ratio</p> Signup and view all the answers

    What are banks required to perform as an internal assessment under BASEL III?

    <p>Perform their own internal assessments of externally rated exposures</p> Signup and view all the answers

    What primary measure is used in the leverage ratio?

    <p>High-quality capital</p> Signup and view all the answers

    Which type of instruments were phased out under the new Tier 1 Capital definition?

    <p>Step-up instruments and cumulative preferred stock</p> Signup and view all the answers

    What is the risk weighting applied to Commercial Public Sector Entities (PSEs)?

    <p>100%</p> Signup and view all the answers

    What is eliminated completely from the regulatory capital under Basel III?

    <p>Tier 3 Capital</p> Signup and view all the answers

    Which credit risk measurement tool is suggested for assessing counterparty risks?

    <p>Stress tests</p> Signup and view all the answers

    What is the goal of introducing a non-risk weighted leverage ratio under BASEL III?

    <p>To limit overall leverage levels</p> Signup and view all the answers

    Which of the following is a primary aim of Basel III?

    <p>To improve risk management and governance</p> Signup and view all the answers

    What is the key purpose of Common Equity Tier 1 (CET1) capital under Basel III?

    <p>To buffer against losses and provide financial stability</p> Signup and view all the answers

    Basel III introduced the Leverage Ratio primarily to:

    <p>Provide a non-risk-based measure to limit excessive leverage</p> Signup and view all the answers

    Which buffer is designed to absorb losses during periods of financial and economic stress?

    <p>Capital Conservation Buffer</p> Signup and view all the answers

    What is the minimum requirement for the Total Capital Ratio including the Capital Conservation Buffer by January 2019?

    <p>10.5%</p> Signup and view all the answers

    Which aspect is NOT a focus of Basel III reforms?

    <p>Introducing strict trading policies</p> Signup and view all the answers

    What is the role of the Countercyclical Capital Buffer in Basel III?

    <p>To mitigate systemic risks during credit cycle fluctuations</p> Signup and view all the answers

    When did the observation period for the Net Stable Funding Ratio begin?

    <p>January 2013</p> Signup and view all the answers

    Which key feature of Basel III aims to strengthen the bank’s transparency and disclosures?

    <p>Market Discipline</p> Signup and view all the answers

    What is the minimum CET1 Capital Ratio requirement by 2019 under Basel III?

    <p>7.0%</p> Signup and view all the answers

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