BANKING GENERAL KNOWLEDGE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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equity
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equity+retained earning+disclosed reserves
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supplementary capital
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equity+reserves
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Detailed explanation-1: -Core capital is the minimum amount of capital that thrift banks must maintain to comply with Federal Home Loan Bank regulations. In combination with risk-weighted assets, core capital is used to determine Common Equity Tier1 (CET1) ratios that regulators rely on to define a bank’s capital requirements.
Detailed explanation-2: -The formula is core capital divided by risk-weighted assets multiplied by 100 to get the final percentage.
Detailed explanation-3: -Undisclosed reserves include unpublished or “hidden” reserves that may not appear on public documents-such as on the balance sheet-but are nonetheless real assets and are considered as such by most banking institutions. Bank reserves are the cash minimums that financial institutions must keep on hand.
Detailed explanation-4: -The tier 1 capital ratio measures a bank’s core equity capital against its total risk-weighted assets-which include all the assets the bank holds that are systematically weighted for credit risk.