Ultimate access to all questions.
Explanation:
To assess capital adequacy, we must calculate the three key Basel capital ratios for each year:
Since the CET1 and Tier 1 ratios are improving, while the Total Capital Ratio is declining (driven by the significant drop in Tier 2 Capital), the overall condition of the capital adequacy ratios is Mixed.
No comments yet.
24.6.4. Assess Company XYZ's capital adequacy over the last three years, as measured by the three key capital ratios.
Company XYZ - Excerpt from Annual Report Disclosure
| 2017 | 2016 | 2015 | |
|---|---|---|---|
| Common Equity Tier 1 Capital ($m) | 146,424 | 142,367 | 137,100 |
| Additional Tier 1 Capital ($m) | 22,639 | 20,443 | 17,600 |
| Tier 2 Capital ($m) | 22,456 | 27,564 | 38,200 |
| Total Regulatory Capital ($m) | 191,519 | 190,374 | 192,900 |
| Credit Risk RWAs ($m) | 960,763 | 989,639 | 968,600 |
| Market Risk RWAs ($m) | 44,100 | 36,910 | 49,600 |
| Operational Risk RWAs ($m) | 293,825 | 256,300 | 224,300 |
| Total RWAs ($m) | 1,298,688 | 1,282,849 | 1,242,500 |
Based on the above, Company XYZ's capital adequacy over the last three years, as measured by the three key capital ratios, signals which of the following conditions?
A
Mixed
B
Declining
C
Improving
D
Not enough data to determine