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Answer: An increase in the CVA due to the bank's asset counterparty positions would tend to raise the bank's risk-weighted assets.
C is correct. Increasing CVA charge increases the amount of risk-weighted assets. A is incorrect because, according to Basel, the conservation buffer can only be met by additional CET 1 capital. B is incorrect since derivative exposure, as well as other off-balance sheet items, are part of the total exposure. As exposure declines, the Total capital ratio increases, assuming no change in Total capital. D is incorrect because the NSFR is calculated as the ratio of the amount of stable funding to the required amount of stable funding. CET 1 capital, which contributes to the numerator, has a weight of 100%, while gold, which contributes to the denominator, has a weight of 50%. Therefore, the increase to the numerator and denominator will not be exactly the same, resulting in a change in the NSFR.
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Upon reviewing the results of the capital analysis report and considering other relevant factors pertaining to Bank LGX's capital planning, which of the following conclusions is correct?
A
The capital conservation buffer can be met by an increase in Tier 2 capital.
B
If the exposure on derivative asset positions decreases, holding other factors constant, the total capital ratio would decrease.
C
An increase in the CVA due to the bank's asset counterparty positions would tend to raise the bank's risk-weighted assets.
D
if the bank raises additional CET 1 capital and invests the same amount in gold, Bank LGX's net stable funding ratio will not change.