Basel-III Framework On Liquidity Standards
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What is the primary objective of the Basel-III liquidity framework introduced by the Basel Committee?
The primary objective is to ensure that banks maintain an adequate level of unencumbered, high-quality liquid assets to survive a significant stress scenario lasting 30 calendar days, thereby promoting short-term and long-term resilience of banks' liquidity risk profiles.
What is the minimum NSFR requirement that banks must maintain under Basel-III?
Banks must maintain NSFR of at least 100%.
What does LCR stand for in the Basel-III liquidity framework?
LCR stands for Liquidity Coverage Ratio, which requires banks to hold sufficient High-Quality Liquid Assets (HQLA) to cover total net cash outflows over a 30-day stress period.
What is the stress scenario period assumed in the LCR calculation under Basel-III?
LCR assumes a 30-day stress scenario period.
What is the minimum LCR requirement prescribed under Basel-III for internationally active banks?
The minimum LCR requirement is 100%, meaning a bank's stock of HQLA must be at least equal to its total net cash outflows over the 30-day stress scenario.
What is the cap on Level 2B assets within the Level 2 asset pool under LCR?
Level 2B assets are capped at 15% of total HQLA.
What does NSFR stand for and what time horizon does it address?
NSFR stands for Net Stable Funding Ratio, and it addresses a one-year time horizon, requiring banks to maintain a stable funding profile in relation to their on- and off-balance sheet activities.
What haircut is applied to Level 2B assets such as corporate bonds under LCR?
A minimum 50% haircut is applied to Level 2B assets.
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