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[Objective GK for Banking Examinations] Banking Regulation and Basel-III

1.

Which among the following is NOT a pillar of Basel III?
[A]Minimum capital standards
[B]Supervisory review
[C]Market discipline
[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.

2.

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.

3.

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)

4.

For the first time, in which year Basel Committee came up with Capital Accords for banks?
[A]1985
[B]1988
[C]1990
[D]1992

1988
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.

5.

Which among the following is NOT a part of Tier-I capital?
[A]Issued Capital
[B]Fully Paid-up Capital
[C]Disclosed Reserves
[D]Undisclosed Reserves

Undisclosed Reserves
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.

6.

What do we call the risk of collapse of an entire financial system or entire market?
[A]Seismic Risk
[B]Systemic Risk
[C]Systematic Risk
[D]Market Risk

Systemic Risk
Systemic risk implies that the failure of the financial system affects other systems such as insurance market or forex market.

7.

A consumer fails to make a payment due on a mortgage loan. This is known as __:
[A]Credit Risk
[B]Refinancing Risk
[C]Liquidity Risk
[D]Settlement Risk

Credit Risk
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.

8.

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).

9.

Which of the following is India’s first Credit Rating Agency?
[A]ICRA
[B]CRISIL
[C]ONICRA
[D]CARE

CRISIL
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.

10.

RBI takes “Prompt Corrective Action” when a bank is faced to __:
[A]Market Risk
[B]Credit Risk
[C]Liquidity Risk
[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.

Comments

  • Priya Patial
    Reply

    l want to make my life very proffesional.in my future I want to do job in bank.god hlp me plzz

    • Asim

      same here

  • Dipayan Ganguly
    Reply

    @ Priya, believe in yourself…. do hard work and leave the rest to God…

  • divya sree
    Reply

    latest updates r available . i am very happy

  • ghanshyam6009
    Reply

    Great job

  • sagy
    Reply

    Am a 2011 passed out student…
    Due to my unfortunate till now I did not get a job ld this affect in interview when I get select???