One of the major emphasis of Basel II is that banks should have

BANKING GENERAL KNOWLEDGE

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	adequate Capital Adequacy Ratio
B	only few branches in urban centres
C	more and more branches in rural areas
D	core banking mode of operation

Explanation:

Detailed explanation-1: -Minimum capital requirements play the most important role in Basel II and obligate banks to maintain certain ratios of capital to their risk-weighted assets.

Detailed explanation-2: -Currently, the minimum ratio of capital to risk-weighted assets is 8% under Basel II and 10.5% under Basel III.

Detailed explanation-3: -According to the draft guidelines published by RBI the capital ratios are set to become: Common Equity as 5% + 2.5% (Capital Conservation Buffer) + 0–2.5% (Counter Cyclical Buffer), 7% of Tier 1 capital and minimum capital adequacy ratio (excluding Capital Conservation Buffer) of 9% of Risk Weighted Assets.

Detailed explanation-4: -Under Basel III, the minimum capital adequacy ratio that banks must maintain is 8%. 1 The capital adequacy ratio measures a bank’s capital in relation to its risk-weighted assets.

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