Question

Question 7:

Capital conservation buffers under Basle III are:

1. Intended to absorb losses during periods of financial and economic stress to avoid a breach of minimum capital requirements.

2. Set at 2.5% and sit on top of the 4.5% common equity requirement.

3. Met with common and preferred stock and retained earnings.

4. Both (a) and (b).

5. All of the answers.

Purchased liquidity:

1. Can be accessed through the federal funds market (U.S. banks) and/or the repurchase agreement market.

2. Allows a bank to maintain its overall balance sheet without disturbing the size and composition of the assets side of the balance sheet.

3. May not be an attractive option for liquidity management when the cost of purchased funds is greater than rates earned on assets.

d.May be a limited option for liquidity management for a bank facing indolvency problems recognising that most purchased funds are not covered by deposit insurance
e. All of the answers.

Answer 1

Q - 7

The correct answer is the last option stating Äll of the answers.

All the statements are true and hence the last option is correct

Q - 8

The correct answer is the last option stating Äll of the answers.

All the statements are true and hence the last option is correct