FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 20: Capital Adequacy

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 1

Multiple Choice

Review LaterAdd Note

Review Later

Which approach used in calculating capital to cover operational risk allow banks to rely on internal data for the calculation of regulatory capital requirements?

A) Standardized approach.
B) Advanced measurement approach.
C) Basic indicator approach.
D) Internal ratings-based approach.
E) All of these.

F) B) and D)
G) B) and C)

Correct Answer

verified

Show Answer

Question 2

True/False

Review LaterAdd Note

Review Later

In determining the risk-adjusted value of the on-balance-sheet credit equivalent amounts of the contingent guarantee contracts, the risk weights are determined by the credit rating of the underlying counterparty of the off-balance-sheet activity.

A) True
B) False

Correct Answer

verified

Show Answer

Question 3

True/False

Review LaterAdd Note

It is likely that the discrepancy between book value of equity and market value of equity will increase as volatility in interest rates increases.

As compared to Basel I, the standardized approach of Basel III is designed to produce capital ratios that are more in line with the actual economic risks that the DTIs are facing.

The potential exposure component of the credit equivalent amount of OBS derivative items reflects

The implementation of true market value accounting for FIs may have adverse effects on small business finance and economic growth because of the hesitancy of FIs to invest in long-term assets.

From a regulatory perspective, what is the impact on book value capital of a 25 basis point decrease in interest rates if the FI is holding a year, fixed-rate, 11 percent annual coupon $100,000 par value bond?

What is the impact on economic capital of a 25 basis point decrease in interest rates if the FI is holding a year, fixed-rate, 11 percent annual coupon bond selling at a par value of $100,000?

One function of bank capital is to protect uninsured depositors, bondholders, and creditors in the event of insolvency and liquidation.

The book value of equity is seldom equal to the market value of equity.

The Asset to Capital Multiple does not account for the risks of off-balance- sheet activities.

Under Basel II (2006), total capital is equal to Tier I capital plus Tier II capital.

The greater the Tier I leverage using the Standardized Approach under Basel III, the more highly leveraged the bank.

The Basic Indicator Approach in calculating capital to cover operational risk requires banks to hold 12 percent of total assets in capital to cover operational risk exposure.

Because of different tax, accounting, and safety-net rules and the application of the new Basel III rules to different industries, a level playing field across banks in different countries will not occur.

Under Basel III, Globally Systematically Important Banks (G-SIBs) were identified by the Bank for International Settlements (BIS) by all of the following indicators except:

Which of the following statements best describes the treatment of adjusting for credit risk of off-balance-sheet activities?

How many institutions are currently listed as Global Systematically Important Banks (G-SIBs) ?

If an FI were closed by regulators before its economic net worth became zero, neither liability holders nor those regulators guaranteeing the claims of liability holders would stand to lose.

Basel III capital ratios will become fully effective for Canadian banks in 2016.