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

Shreyas Bank has Common Equity Tier 1 capital of Rs 900 crore, Additional Tier 1 of Rs 150 crore, Tier 2 of Rs 200 crore, and total risk-weighted assets of Rs 10,000 crore. What is its Tier 1 capital ratio?

The Tier 1 capital ratio is 10.5%. Tier 1 capital is CET1 plus Additional Tier 1, which is Rs 1,050 crore, divided by risk-weighted assets of Rs 10,000 crore. Tier 2 capital is excluded from Tier 1, so it is not added.

  1. A9.0%
  2. B10.5%Correct
  3. C12.5%
  4. D11.0%

Explanation

Tier 1 capital = CET1 + AT1 = 900 + 150 = Rs 1,050 crore. Tier 1 ratio = 1,050 / 10,000 = 10.5%. The 9.0% option counts only CET1, and 12.5% wrongly adds Tier 2 as well (total capital ratio would be 12.5%).

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