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CAIIB ABM Module A & C By Ashish Sir Class 12
What does the term 'Capital Adequacy' refer to in the context of banking regulation?
Capital adequacy refers to the minimum amount of capital a bank must hold relative to its risk-weighted assets, ensuring the bank can absorb losses and protect depositors. Under Basel III, the minimum CAR for Indian banks is 9% (higher than the 8% Basel minimum).
What is the concept of Net Interest Income (NII) sensitivity in banking?
Change in NII due to interest rate fluctuations over a period
What is the difference between Tier 1 and Tier 2 capital under Basel III norms?
Tier 1 capital (going-concern capital) includes Common Equity Tier 1 (CET1) and Additional Tier 1 instruments like perpetual bonds, representing core capital. Tier 2 capital (gone-concern capital) includes subordinated debt and general provisions, acting as a secondary buffer for creditors in liquidation.
What is Basis Risk in the context of interest rate risk management?
Risk from imperfect correlation between rates on assets and liabilities
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