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CS Professional · Banking and Insurance - Laws and Practice · Risk Management in Banks and Basel Accords

A compliance officer at Sundaram Bank is preparing a note on the structure of Basel II. Which set correctly lists its three pillars?

Basel II's three pillars are minimum capital requirements, the supervisory review process and market discipline through disclosure. Pillar 1 covers credit, market and operational risk. Liquidity coverage, leverage ratio and capital buffers are Basel III features, not part of the Basel II pillars.

  1. AMinimum capital requirements; supervisory review process; market disciplineCorrect
  2. BMinimum capital requirements; liquidity coverage; leverage ratio
  3. CCapital conservation buffer; countercyclical buffer; market discipline
  4. DCredit risk weights; supervisory review; leverage ratio

Explanation

Basel II rests on Pillar 1 (minimum capital for credit, market and operational risk), Pillar 2 (supervisory review, including ICAAP) and Pillar 3 (market discipline through disclosures). Liquidity coverage, leverage ratio and buffers belong to Basel III.

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