Explanation:
According to the revised Basel III guidelines, the minimum capital adequacy ratio, including the capital conservation buffer, is 10.5%. As can be seen from the calculations below, only bank C has failed to attain the minimum ratio.
Capital adequacy ratio =
| Bank | A | B | C | D |
|---|---|---|---|---|
| Tier I capital | 5 | 8 | 15 | 25 |
| Tier II capital | 3 | 3 | 5 | 10 |
| Risk-weighted assets | 30 | 40 | 240 | 230 |
| CAR (Capital adequacy ratio) | 26.7% | 27.5% | 8.3% | 15.2% |
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Q.3103 Four European banks, A, B, C, and D have the following capital amounts and risk weighted assets (in $m):
| Bank | A | B | C | D |
|---|---|---|---|---|
| Tier I capital | 5 | 8 | 15 | 25 |
| Tier II capital | 3 | 3 | 5 | 10 |
| Risk-weighted assets | 30 | 40 | 240 | 230 |
Which of the four banks is in violation of the capital adequacy requirements as set out in the Basel III reforms announced in 2017?
A
Bank A
B
Bank B
C
Bank C
D
Bank D
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