BASEL III BUFFERS, LIQUIDITY RATIOS, LEVERAGE RATIO
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Risk Management (Elective) — CAIIB.
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Free sample — 8 of 66 rapid-fire Q&A cards.
What is the Capital Conservation Buffer (CCB) under Basel III and what is its prescribed level?
The CCB is an additional layer of common equity tier-1 capital held above the minimum requirement to absorb losses during periods of stress, prescribed at 2.5% of risk-weighted assets.
What is the minimum Capital Conservation Buffer (CCB) a bank must maintain above minimum CET1?
2.5% of Risk Weighted Assets
What happens to a bank's dividend and bonus distributions when its capital falls into the CCB range?
When a bank's capital falls within the CCB range, restrictions are placed on profit distributions including dividends, share buybacks, and discretionary staff bonuses, with stricter restrictions applying the deeper the breach.
What is the prescribed minimum Countercyclical Capital Buffer range under Basel III?
0% to 2.5% of Risk Weighted Assets
What is the Countercyclical Capital Buffer (CCyB) and who activates it?
The CCyB is a macroprudential tool of 0–2.5% of RWA that national regulators activate during periods of excessive credit growth to build up capital that can be released in downturns.
What is the minimum LCR that banks were required to maintain by January 2019?
100% of net cash outflows
What is the purpose of the Countercyclical Capital Buffer in the context of the credit cycle?
It aims to protect the banking sector against losses arising from excess aggregate credit growth, and when released, it helps banks continue lending without depleting minimum capital requirements.
What is the minimum NSFR prescribed under Basel III for banks?
100% (ASF must equal or exceed RSF)
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