Chapter 20 Flashcards
1
Q
what are the functions of capital
A
1) absorb unanticipated losses
2) Protect uninsured depositors and other stakeholders
3) Protect FI insurance funds and taxpayers
4) Protect FI owners against increases in insurance premiums
5) Fund branch and other real investments
2
Q
what is basel 1
A
introduced minimum capital requirements for banks to reduce credit risk and enhance financial stability
3
Q
what is basel 2
A
Added rules for managing other risks like operational risk
4
Q
what is basel 3
A
after 2008 crisis, enforced stricter rules to ensure banks could survive big financial shocks
5
Q
what indicates a high quality capital
A
use of common equity and retained earnings
