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IMP CASE STUDIES
In a case study where a bank's VaR at 99% confidence level is Rs. 10 crore, what does this figure imply?
It implies that there is a 1% probability that the bank's losses will exceed Rs. 10 crore on any given day, and a 99% probability that losses will be within this threshold.
In a case study where a bank's Capital Conservation Buffer is breached, what restriction is immediately imposed?
Dividend and bonus payouts are restricted to conserve capital.
A bank holds a trading portfolio with a 10-day VaR of Rs. 50 crore; how is the 1-day VaR derived under Basel norms?
The 1-day VaR is derived by dividing the 10-day VaR by the square root of 10, giving approximately Rs. 15.81 crore, as VaR scales with the square root of time.
A bank's Tier 2 capital includes a subordinated debt of Rs. 100 crore with 3 years remaining; how much is eligible under Basel III?
Only 60% i.e. Rs. 60 crore is eligible due to amortisation rules.
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