CORES Basel Framework & Capital Requirements 2

Question 1

Under Basel III, what is the minimum Common Equity Tier 1 (CET1) capital ratio required for banks?

Accepted Answer

4.5%

Answer

Basel III requires banks to hold a minimum CET1 ratio of 4.5% of risk-weighted assets.

Question 2

Which Basel III buffer is designed to be drawn down during periods of economic stress and must be rebuilt during recovery?

Accepted Answer

Capital conservation buffer

Answer

The capital conservation buffer (2.5% of RWA) is designed to absorb losses during periods of stress and must be replenished afterward.

Question 3

The Basel III Leverage Ratio is calculated as Tier 1 capital divided by which denominator?

Accepted Answer

Total exposure measure (on- and off-balance-sheet)

Answer

The leverage ratio uses a total exposure measure that includes both on-balance-sheet assets and off-balance-sheet items.

Question 4

Under the Basel Standardized Approach for operational risk (Basel III revised framework), the Business Indicator Component (BIC) is calculated using which multiplier schedule?

Accepted Answer

Marginal coefficients of 12%, 15%, and 18% applied to BI buckets

Answer

The BIC applies marginal coefficients of 12%, 15%, and 18% to three progressive Business Indicator buckets.

Question 5

What is the primary purpose of the Net Stable Funding Ratio (NSFR) introduced under Basel III?

Accepted Answer

Promote resilience over a one-year horizon by requiring stable funding sources

Answer

The NSFR requires banks to maintain stable funding relative to their assets over a one-year horizon, reducing reliance on short-term wholesale funding.

(CORES) Certified Operational Risk Executive Specialist Practice Test

(CORES) Certified Operational Risk Executive Specialist Practice Test

CORES Basel Framework & Capital Requirements 2