As per ’Basel III: A global regulatory framework for more resilient banks and banking systems’ released in December 2010, banks will be required to hold a capital conservation buffer of ______ of risk weighted assets (RWAs) in the form of common equity to withstand future periods of stress.
Show answer & explanation
Correct answer: B
Explanation
The correct answer is Option 2. i.e. 2.5%.
- As per the Draft Master Direction on Prudential Regulation for AIFIs, the AIFIs will implement all the three Pillars of Base-III capital regulations.
- Pillar 1 will cover capital, risk coverage and contain leverage. Pillar 2 will cover risk management and supervision while Pillar 3 will cover market discipline.
- The central bank wants AIFIs to achieve minimum total capital of 9% and capital conservation buffer of 2 5%, with the minimum total capital and CCB adding upto 11.5% by April 1, 2022.