Financial Risk Manager Part 2
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Each of the following was both (i) a deficiency or omission of Basel II but is, at the same time, (ii) explicitly addressed by new requirement in Basel III except for
A
Basel II did not formally include liquidity risk, but Basel III explicitly covers liquidity risk
B
Basel II could arguably create a procyclical effect, but Basel III explicitly adds a buffer to address this
C
Basel II did not require external credit ratings, but Basel III seeks to increase the reliance on external ratings
D
Basel II allowed many banks to show strong risk-based regulatory capital ratios despite high on- and off-balance sheet leverage; Basel III adds a simple leverage ratio to act as a backstop to the risk-based capital ratio