Which among the following is NOT a pillar of Basel III?
[A]Minimum capital standards
[D]Consolidation of assets
Consolidation of assets
The Basel III framework is based on 3 components called 3 pillars, which include: Pillar 1 : Minimum capital standards, Pillar 2 : Supervisory review and Pillar 3 : Market discipline.
Capital Adequacy Ratio is a thermometer of Bank’s health. It is the ratio of a bank’s __:
[A]capital to its risk
[B]risk to capital
[C]capital to assets
[D]capital to liabilities
capital to its risk
Capital Adequacy Ratio is a thermometer of Bank’s health, because it is the ratio of its capital to its risk. So simply, Capital Adequacy Ratio = Capital ÷ Risk.
Which of the following types of risks are used in calculation of Capital to Risk (Weighted) Assets Ratio (CRAR)?
1. Credit Risk
2. Market Risk
3. Operational Risk
Select the correct option from the codes given below:
[A]Only 1 & 2
[B]Only 2 & 3
[C]Only 1 & 3
[D]1, 2 & 3
1, 2 & 3
Total capital ratio (CRAR) = Eligible Total Capital / RWA for (Credit risk + Market risk + Operational risk)
For the first time, in which year Basel Committee came up with Capital Accords for banks?
The BCBS first came out with 1988 Capital Accord for banks, taking into account the elements of risk in various types of assets in the balance sheet as well as off-balance sheet business.
Which among the following is NOT a part of Tier-I capital?
[B]Fully Paid-up Capital
Tier 1 mainly includes permanent shareholders’ equity (which includes issued and fully paid ordinary shares / common stock and perpetual non-cumulative preference shares) and disclosed reserves (or profits created or increased by appropriations of retained earnings or other surplus, e.g.: share premiums, retained profit, general reserves and legal reserves). On the other hand, Tier-II includes undisclosed reserves and other subordinate capital.
What do we call the risk of collapse of an entire financial system or entire market?
Systemic risk implies that the failure of the financial system affects other systems such as insurance market or forex market.
A consumer fails to make a payment due on a mortgage loan. This is known as __:
Credit risk refers to the risk that a borrower will default on any type of debt by failing to make required payments. The risk is primarily that of the lender and includes lost principal and interest, disruption to cash flows, and increased collection costs. The loss may be complete or partial and can arise in a number of circumstances.
What is leverage ratio?
[A]capital to total assets (risk-weighted).
[B]capital to total assets (not risk-weighted).
[C]capital to total liabilities
[D]Tier-I capital to Tier-II capital
capital to total assets (not risk-weighted)
A leverage ratio is the relative amount of capital to total assets (not risk-weighted).
Which of the following is India’s first Credit Rating Agency?
CRISIL is India’s first credit rating agency, incorporated in 1987 and was promoted by the erstwhile ICICI Ltd, along with UTI and other financial institutions.
RBI takes “Prompt Corrective Action” when a bank is faced to __:
[D]Low Capital Adequacy
Low Capital Adequacy
Prompt Corrective Action is a system of RBI under which it can initiate a corrective action in case of a bank which is found to be having low capital adequacy or high Non- performing Assets.