MANAGEMENT

Detailed explanation-1: -1 Basel III changed how risk-weighted assets are calculated. Under Basel III, U.S. government debt and securities are given a risk weight of 0%, while residential mortgages not guaranteed by the U.S. government are weighted anywhere from 35 to 100%, depending on a risk assessment sliding scale.

Detailed explanation-2: -Risk-weighted assets, or RWA, are used to link the minimum amount of capital that banks must have, with the risk profile of the bank’s lending activities (and other assets). The more risk a bank is taking, the more capital is needed to protect depositors.

Detailed explanation-3: -Risk-weighted assets is a banking term that refers to an asset classification system that is used to determine the minimum capital that banks should keep as a reserve to reduce the risk of insolvency.

Detailed explanation-4: -Basel II also refined the definition of risk-weighted assets, used in calculating whether a bank meets its capital reserve requirements. Risk weighting is intended to discourage banks from taking on excessive amounts of risk in terms of the assets they hold.