GENERAL KNOWLEDGE

Detailed explanation-1: -Which one of the following belongs to Bank Capitalization? Basel III or the Third Basel Accord is a global, voluntary regulatory standard on bank capital adequacy, stress testing and market liquidity risk.

Detailed explanation-2: -Bank capital is the difference between a bank’s assets and its liabilities, and it represents the net worth of the bank or its equity value to investors. The asset portion of a bank’s capital includes cash, government securities, and interest-earning loans (e.g., mortgages, letters of credit, and inter-bank loans).

Detailed explanation-3: -Basel Norm III is also known as the Third Basel Accord or Basel Standards. It is a regulatory framework followed on a voluntary basis on a global scale. The framework deals with capital adequacy in banks, stress testing, and market liquidity risk. Aspirants would find this topic helpful in the IAS Exam.

Detailed explanation-4: -Minimum Total Capital Ratio remains at 8%. The addition of the capital conservation buffer increases the total amount of capital a financial institution must hold to 10.5% of risk-weighted assets, of which 8.5% must be tier 1 capital. Tier 2 capital instruments are harmonized and tier 3 capital is abolished.