Exam 15: The Management of Capital

_________ are a type of long-term debt capital whose claims legally follow after the claims of depositors.

Which of the following would not be an example of operational risk?

According to the textbook,the role(s)of capital is to:

A bank has capital to risk-weighted assets of 9.2%,Tier 1 capital to risk-weighted assets of 5% and a leverage ratio of 4.8%.What type of bank is this?

Basel II requires each bank to determine its own capital requirements based on its own calculated risk exposure.

Which of the following would be an example of exchange risk?

Which of the following is not a weakness of Basel I risk-based capital standards?

At the center of the debate of the Basel Agreement is the ____________,headquartered in Basel,Switzerland,which assists central banks in their transactions with each other and serves as a forum for international financial issues.

One of the reasons to regulate the capital position of banks is to limit the risk of bank failures,especially large bank failures.

Which of the following would be an example of interest rate risk?

In the United States a 'well capitalized' bank must have a ratio of capital to risk-weighted assets of at least:

Even if individual banks are good at forecasting risk using VaR models,there may still be problems because losses may occur at several banks at the same time due to the interdependency of the financial system,magnifying each bank's risk exposure and possibly causing a major problem for regulators.The book calls this:

The Perdue Bank of Houston,has just hired a new manager who has a reputation of anticipating potential problems and acting quickly to prevent those problems so that the bank stays healthy and profitable.What defense against risk is this bank making?

Core capital includes the surplus value of common stock.

A bank has $200 million in assets in the 0 percent risk-weight category.It has $400 million in assets in the 20 percent risk-weight category.It has $1,000 million in assets in the 50 percent risk-weight category and has $1,000 million in assets in the 100 percent risk-weight category.This bank has $96 million in Tier 1 capital and $48 million in Tier 2 capital.What is this bank's ratio of Tier 2 capital to risk assets?

There are three pillars of Basel II.One of them is to make market discipline a powerful force compelling risky banks to lower their risk exposure.What does Basel II want to do to make this happen?

Geographic diversification refers to the spreading out credit accounts and deposits among a wide variety of customers within a country,including large and small business accounts,different industries,and households with a variety of sources of income and collateral.

In the United States a bank to be considered 'adequately capitalized' must have a ratio of Tier 1 (or core)capital to risk-weighted assets of at least:

If the ratio of tangible equity capital to total assets is 2 percent or less,it is subject to being placed in conservatorship or receivership unless the institution's principal regulator and the FDIC determine that it would be in the public interest to allow the institution to continue under present ownership and management.

One of the key pillars for capital regulation in Basel II was to require banks to hold capital against its own estimated risk exposure from operational risk.