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CAIIB ABM Module A & C By Ashish Sir Class 5
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 to absorb potential losses and protect depositors. It is expressed as a ratio under Basel norms to ensure financial stability.
What is the Leverage Ratio under Basel III and what is the minimum requirement?
Tier 1 capital divided by total exposure; minimum 3%.
What is the full form of RAROC and what is its significance in bank management?
RAROC stands for Risk-Adjusted Return on Capital, and it measures profitability by adjusting returns for the risk taken to generate them. It helps banks allocate capital efficiently and evaluate performance across different business units.
What is the Countercyclical Capital Buffer (CCyB) under Basel III?
Extra capital buffer of 0–2.5% during credit booms.
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