Capital and Banking Regulation
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Bank Financial Management — CAIIB.
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Pillar 1 — Focus / Key Mechanism?
Focus: Minimum Capital Requirement; Key Mechanism: Quantitative capital floors for credit, market & operational risk
Pillar 2 — Focus / Key Mechanism?
Focus: Supervisory Review Process (SRP / ICAAP); Key Mechanism: Banks self-assess overall risk; supervisors review and may demand extra capital
Pillar 3 — Focus / Key Mechanism?
Focus: Market Discipline; Key Mechanism: Mandatory public disclosures so investors & depositors can judge bank health
CET1 (Common Equity Tier 1) — Composition / Loss-Absorption?
Composition: Paid-up equity, retained earnings, statutory reserves, share premium; Loss-Absorption: Highest — absorbs losses on a going-concern basis
AT1 (Additional Tier 1) — Composition / Loss-Absorption?
Composition: Perpetual Non-Cumulative Preference Shares (PNCPS), Perpetual Debt Instruments (PDI); Loss-Absorption: Going-concern (with loss-absorbing triggers)
Tier 2 Capital — Composition / Loss-Absorption?
Composition: Subordinated debt (≥5yr), revaluation reserves @55%, general provisions (up to 1.25% of credit RWA); Loss-Absorption: Gone-concern — absorbs losses only on liquidation
CET1 — Basel Min / RBI Min / With CCB (RBI)?
Basel Min: 4.5%; RBI Min: 5.5% (RBI, current); With CCB (RBI): 8.0%
Tier 1 Capital — Basel Min / RBI Min / With CCB (RBI)?
Basel Min: 6.0%; RBI Min: 7.0% (RBI, current); With CCB (RBI): 9.5%
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