Topic 19 Flashcards
Prudential supervision
Which of the following risks would be defined as that arising from the way a business is run and managed?
a. Capital adequacy risk.
b. Internal risk.
c. Liquidity risk.
d. Operational risk.
d. Operational risk.
A bank’s capital, expressed as a proportion of the risk-adjusted value of its assets, is referred to as its:
a. capital adequacy margin.
b. liquidity ratio.
c. prudential standard.
d. solvency ratio.
d. solvency ratio.
The Prudential Regulation Authority (PRA) is responsible for the prudential regulation of which types of financial firms?
a. All firms that provide financial advice only.
b. Banks and building societies only.
c. Deposit takers and significant investment firms only.
d. Deposit takers, significant investment firms and insurers.
d. Deposit takers, significant investment firms and insurers.
Under Basel III regulatory capital requirements, which of the following assets would have the lowest risk weighting?
a) Unsecured loans.
b) Secured loans.
c) Mortgages.
d) Gilts.
d) Gilts.
The Basel Committee acts under the auspices of the:
a) Bank for International Settlements.
b) World Bank.
c) International Monetary Fund.
d) European Central bank.
a) Bank for International Settlements.
The EU Directive, Solvency II, aims to:
a) restrict banks’ lending to a percentage of their capital.
b) ensure banks and building societies keep customer deposits separate from its own funds.
c) increase the amount of available capital for a bank to meet liquidity demands.
d) reduce the risk of an insurance company being unable to meet its claims.
d) reduce the risk of an insurance company being unable to meet its claims.
Under Basel II, the capital required to cover operational risk is gross annual income multiplied by:
a) 0.10.
b) 0.15.
c) 0.20.
d) 0.25.
b) 0.15.
The Capital Requirements Directives (CRDs) apply to banks, building societies and insurers.
True or False?
False: It applies to banks, building societies and investment companies.
Total loss‑absorbing capacity (TLAC) requirements apply to:
a) Investment companies.
b) Insurance companies.
c) All banks and deposit-takers.
d) Globally systemically important banks.
d) Globally systemically important banks.
The Basel III net stable funding ratio, requires that a bank’s:
a) income and profits meet certain stability standards.
b) short-term financial resources exceed short-term commitments.
c) assets meet specified quality requirements.
d) long‑term financial resources exceed long‑term commitments.
d) long‑term financial resources exceed long‑term commitments.
Basel III liquidity coverage ratio requires a bank’s available high‑quality liquid assets to exceed the net cash outflows expected over the next:
a) 7 days.
b) 14 days.
c) 28 days.
d) 30 days.
d) 30 days.
Although it has adequate assets, Blazing Bank is unable to meet customers’ demands to withdraw cash. This means it has a:
a) liquidity problem.
b) liability concentration problem.
c) capital adequacy problem.
d) solvency shortage.
a) liquidity problem.
When looking at capital adequacy, a firm’s solvency ratio is its:
a) capital as a percentage of its risk-adjusted assets.
b) risk-adjusted assets as a percentage of its capital.
c) capital reserves as a percentage of its turnover.
d) liabilities as a percentage of its risk-adjusted assets.
a) capital as a percentage of its risk-adjusted assets.
