CAIIB ABM Module A & C By Ashish Sir Class 10
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Advanced Bank Management — CAIIB.
One-liners from this chapter
Free sample — 8 of 65 rapid-fire Q&A cards.
What does the Capital Adequacy Ratio (CAR) measure in banking?
CAR measures a bank's capital in relation to its risk-weighted assets, ensuring the bank can absorb a reasonable amount of loss before becoming insolvent. Under Basel III, Indian banks must maintain a minimum CAR of 9%.
What is the Leverage Ratio under Basel III and its minimum requirement?
Non-risk-based measure; minimum 3% of Tier 1 capital to total exposure.
What is the difference between Tier 1 and Tier 2 capital under Basel III norms?
Tier 1 capital (core capital) includes paid-up equity capital, retained earnings, and other disclosed reserves, while Tier 2 capital (supplementary capital) includes revaluation reserves, subordinated debt, and undisclosed reserves. Tier 1 is considered more loss-absorbing than Tier 2.
What is the Capital Conservation Buffer (CCB) required under Basel III?
Additional 2.5% of RWA held as common equity Tier 1 capital.
What is the concept of Risk-Weighted Assets (RWA) in the context of capital adequacy?
Risk-Weighted Assets are calculated by multiplying each asset category by its prescribed risk weight, reflecting the credit risk inherent in different types of assets. Higher-risk assets like unsecured loans carry a higher risk weight (e.g., 100-150%) compared to government securities (0%).
What is the Countercyclical Capital Buffer (CCyB) and its purpose?
0-2.5% additional capital buffer to absorb losses during economic downturns.
What is the Liquidity Coverage Ratio (LCR) and what is its regulatory purpose?
LCR requires banks to hold sufficient High Quality Liquid Assets (HQLA) to cover total net cash outflows over a 30-day stress period. RBI mandates a minimum LCR of 100% for Indian banks to ensure short-term resilience during liquidity stress.
What is the Systemically Important Bank (SIB) surcharge under Basel III?
Additional capital of 0.25% to 3.5% RWA for systemically important banks.
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