CAIIB ABM Module A & C By Ashish Sir Class 5
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 66 rapid-fire Q&A cards.
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.
Under Basel III, what is the minimum Common Equity Tier 1 (CET1) capital ratio required?
Under Basel III, banks are required to maintain a minimum CET1 capital ratio of 4.5% of risk-weighted assets. Including the capital conservation buffer of 2.5%, the effective minimum CET1 requirement becomes 7%.
What is the Debt Service Coverage Ratio (DSCR) used for in credit appraisal?
Measures borrower's ability to repay loan from cash flows.
What is the difference between Tier 1 and Tier 2 capital under Basel norms?
Tier 1 capital is core capital comprising equity capital and disclosed reserves that provide the most loss-absorbing capacity on a going-concern basis. Tier 2 capital is supplementary capital including subordinated debt and undisclosed reserves, providing loss absorption on a gone-concern basis.
What is meant by 'Marginal Cost of Funds Based Lending Rate' (MCLR)?
Benchmark lending rate linked to marginal cost of funds.
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