Exam 18: Capital Management and Adequacy

The regulation required under Basel II is more costly than that required under Basel III, due to the higher liquid assets requirements and the higher levels of primary capital.

The calculation of the risk-adjusted asset values of OBS market contracts:

Tier I capital ratio is the ratio of total Tier 1 capital to the risk-adjusted assets of a DI.

Choose the correct statement:

The risk of loss owing to changes in the general level of market prices or interest rates, arising from positions in interest rate, equities, foreign exchange and commodities is:

Choose the correct statement:

Counterparty credit risk is the risk that the other side of a contract will default on payment obligation.

Consider an FI with the following off-balance-sheet items: A two-year loan commitment with a face value of $120 million, a standby letter of credit with a face value of $20 million and trade-related letters of credit with a face value of $70 million.What is the total credit equivalent amount?

Market to book ratio is a ratio that shows the discrepancy between the:

Loan loss reserve is:

Choose the correct capital adequacy ratio(s):

Current credit exposure is the risk that a counterparty to a derivative securities contract will default in the future.

The leverage ratio is calculated as assets divided by core capital.

Which of the following are criticisms of a risk-based capital ratio?

Why is a regulatory capital charge against operational risk necessary?

Netting is the process under a netting agreement of combining all relevant outstanding transactions between two counterparties and reducing them to a single net sum for a party to either pay or receive.

In the standardised approach to operational risk capital, FIs are required to map their overall gross income into eight business lines that are predetermined by the bank regulator.

Assume you are presented with the following data regarding an FI's asset and liability values: Bookvalue of assets \ 50000 Bookvalue of liabilities \ 42000 Market value of assets \ 48000 Market value of liabilities \ 45000 Which of the following statements is true?

Common equity Tier 1 capital ratio $=\frac{\text { Common equity Tier } 1 \text { capital }}{\text { Total risk -adjusted assets }} \geq 4.5 \%$ at all times -What are the three limits and minimums of the two tiers of capital?

Which of the following statements is true?