Chapter 2: International Risk Regulation

Question 1

What is the BIS?

Answer 1

Bank for International Settlements
Acts as the bank for central banks
Regulators’ regulator

Question 2

What is the Basel Comittee?

Answer 2

Committee for banking supervision worldwide
Establishes standards for capital adequacy

Question 3

What are the 3 capital adequacy pillars of the Basel Committee?

Answer 3

Pillar 1: Minimum Level of Capital
Pillar 2: Firms opinion on level of capital to be held
Pillar 3: Public Disclosure of firms capital and risk management

Question 4

What are the two types of capital a bank needs to consider when running business?

Answer 4

Economic: Needed for day-to-day business
Regulatory: Mandated by regulators

Question 5

What is the Basel Pillar 1 minimum capital requirement?

Answer 5

8%

Question 6

How is Basel Pillar 1 calculated?

Answer 6

capital / (credit + market + operational risk)

Question 7

What is Basel Pillar 2 for?

Answer 7

Allows a firm to provide extra information on any risks/mitigations that should be taken into account when deciding capital adequacy requirements

Question 8

What is the Basel Concordat on Cross-Border Banking?

Answer 8

Framework for banks that operate in multiple jurisdictions.