Economics • Banking & FinanceMedium
In the context of the Indian banking sector, what does the term 'Basel III Leverage Ratio' measure?
A. Tier-1 capital divided by total unweighted exposure measure (on and off-balance sheet items)✓ Correct Answer
B. Total risk-weighted assets divided by regulatory capital reserves
C. Short-term liquid assets divided by short-term cash outflows
D. Non-performing assets divided by total gross advances
💡 Solution & Explanation
The Basel III leverage ratio is defined as the capital measure, specifically Tier-1 capital, divided by the total unweighted exposure measure encompassing both on and off-balance sheet items. It serves as a backstop to risk-based capital requirements to prevent excessive bank leverage. Prudential banking norms and international regulatory frameworks are recurrent themes in economic assessments.
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