Economics • Banking & FinanceHard
Evaluate the objectives of Basel III capital adequacy norms implemented across international banking systems. Which of the following components constitutes Tier One capital under these regulatory guidelines?
A. Common Equity Tier One capital and eligible disclosed reserves along with qualifying perpetual non-cumulative preference shares✓ Correct Answer
B. Subordinated term debt instruments and general loan loss provisions up to specified percentage ceilings
C. Revaluation reserves arising from the formal revaluation of fixed bank premises
D. Short-term unsecured commercial paper issued by parent holding companies
💡 Solution & Explanation
Tier One capital under Basel III norms primarily consists of Common Equity Tier One capital, which includes common stock, retained earnings, and qualifying capital instruments that absorb losses on a going-concern basis. Subordinated debt instruments generally form part of Tier Two capital as gone-concern loss-absorption buffers. These rigorous capital standards were formulated by the Basel Committee on Banking Supervision to enhance systemic resilience.
More Economics Banking & Finance questions
- Which financial metric evaluates the proportion of total deposits that commercial bank branches in Haryana…
- In the context of microfinance and Self-Help Group bank linkage programs in Chhattisgarh, what is the primary…
- Consider the operation of the Prompt Corrective Action framework administered by the Reserve Bank of India…
- What is the statutory requirement mandated by the Cash Reserve Ratio (CRR) for scheduled commercial banks in…
- What is the primary purpose of the 'Account Aggregator' framework in the Indian financial sector?