Quiz: Management of Capital Flashcards
Capital serves as a regulatory of growth, helping to ensure that growth is sustainable in the short run
False
A type bank of capital that is more permanent in nature and it consists of common stock and disclosed reserves
Core Capital
Capital promotes public confidence but can’t reassure creditors concerning an institution’s financials
False
In Basel 2, apart from Credit & Market Risk, Liquidity Risk was considered in the Capital Adequacy Ratio calculation
False
Is an international business standard that requires financial institutions to maintain enough cash reserves to cover risks incurred by operations
Basel 2
Basel 1 was formed in 1988 in response to the growing number of international banks
True
Banks are obliged to assess the internal capital adequacy for covering all risks they can potentially face in the course of their operations. The supervisory is responsible for ascertaining whether the bank uses appropriate assessment approaches and covers all risk associated
Supervisory Review
Requires the bank to maintain a minimum capital adequacy requirement of 8% of its RWA. Also provides banks with more informed approaches to calculate credit requirement based on credit risk
Minimum Capital
Banks are required to disclose relevant market information. This is done to make sure that the users of financial information receive the relevant information to make informed financial decisions
Market Discipline
A Type of Bank Capital that is temporary in nature. It consists of funds that are not disclosed in the Financial Statements of the bank
Supplementary Capital
Banks that operate internationally must maintain capital (Tier 1 & 2( equal to at least 10% of their risk-weighted assets
False
A kind of risk that is due to weather damage, aging or faulty computer systems, breakdown in quality control, inefficiencies in producing and delivering services, and fluctuations in the economy that impact the demand for each financial service
Operational Risk
