Exam 15: The Management of Capital

The task of correctly adding up all of the different types of bank risk exposures is known as:

Under the international capital (Basel)agreement,Tier 2 capital must be raised to a minimum of 4 percent of risk-weighted assets.

VaR models are most successful in assessing potential risk when the assets are non-traded.

Core capital such as common stock and surplus,undivided profits,qualifying noncumulative perpetual preferred stock,etc.is referred to as __________________ capital,as defined by the Basel agreement.

A bank has $100 million in assets in the 0 percent risk-weight category,$200 million in assets in the 20 percent risk-weight category,$500 million in assets in the 50 percent risk-weight category,and $750 million in assets in the 100 percent risk-weight category.This bank has $57 million in core (Tier 1)capital.What is this bank's ratio of Tier 1 capital to risk-weighted assets?

The Michelson Bank of Stetson,wants to protect itself from risk.It decides to make loans in Florida,Georgia,Texas,and Oklahoma as well as invest in municipal bonds from California and Oregon.What defense against risk is this bank making?

VaR models measure the market risk and indicate the potential for losses on a portfolio of assets.

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

One defense against risk for a bank is to spread out its credit accounts and deposits among a wide variety of customers,including large and small business accounts,different industries,etc.This defense is known as ________________________.

A bank that is 'well-capitalized':

A bank that is 'critically undercapitalized':

The largest component of capital among commercial banks is ___________.

Equity notes are considered to be part of Tier 1 capital.

The internal capital growth rate for a bank is a function of which of the following factors?

A bank has capital to risk-weighted assets of 1.8%.What type of bank is this?

Deposits with the Federal Reserve banks are considered to have moderate credit risk and are therefore placed in the 50 percent risk-weight category.

_________ for banks include assets like mortgage servicing rights and purchased credit card relationships and such assets can be counted as part of bank capital.

A bank that is adequately capitalized:

Regulatory capital focuses on the market value of equity.

A bank has decided to retain more of their earnings,moving their retention ratio from 40% to 70%.What way of meeting their capital needs is the bank taking?