GLOBAL FINANCIAL CRISIS AND BASEL III
Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Risk Management (Elective) — CAIIB.
One-liners from this chapter
Free sample — 8 of 66 rapid-fire Q&A cards.
What triggered the Global Financial Crisis of 2007–2008?
The crisis was triggered by the collapse of the U.S. subprime mortgage market, which led to massive losses in mortgage-backed securities held by global financial institutions.
What is the minimum Total Capital Ratio required under Basel III?
8% of risk-weighted assets at all times.
What are subprime mortgages?
Subprime mortgages are home loans extended to borrowers with poor credit histories or low income, carrying higher interest rates and default risk than prime mortgages.
What does BCBS stand for in the context of banking regulation?
Basel Committee on Banking Supervision.
What is a Collateralised Debt Obligation (CDO)?
A CDO is a structured financial product that pools various debt instruments (including subprime mortgages) and issues tranches to investors with different risk/return profiles.
What is the minimum Tier 1 capital ratio mandated by Basel III?
6% of risk-weighted assets.
What role did credit rating agencies play in the Global Financial Crisis?
Credit rating agencies assigned inflated AAA ratings to complex mortgage-backed securities, misleading investors about the true risk embedded in these instruments.
What is the minimum CET1 ratio including the Capital Conservation Buffer under Basel III?
7% (4.5% CET1 plus 2.5% buffer).
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