FRM Part I · FRM Exam Part I · Banks
Which of the following instruments is classified as Common Equity Tier 1 capital under Basel III?
Ordinary share capital and retained earnings are Common Equity Tier 1 capital, the highest-quality loss-absorbing capital. Perpetual non-cumulative preferred shares count as Additional Tier 1, while subordinated debt and limited general loan loss provisions are Tier 2 capital.
- ASubordinated debt with a original maturity of ten years
- BPerpetual non-cumulative preferred shares
- COrdinary share capital and retained earningsCorrect
- DLoan loss general provisions up to a limit
Explanation
CET1 consists of common shares and retained earnings (with regulatory adjustments). Perpetual non-cumulative preferred shares are Additional Tier 1, while subordinated debt and limited general provisions are Tier 2.
Did you get it right without looking?
One question tells you little. A timed set on Banks shows your real accuracy, how long you take and where you lose marks.
More Banks questions
- A bank has HQLA of USD 12 billion. Projected total cash outflows over the next 30 days under stress are USD 20 billion, and projected inflow…
- Which of the following best describes the purpose of a capital conservation buffer in Basel III?
- Which of the following best explains why the originate-to-distribute model weakened lending standards before the 2007-2009 crisis?
- Which of the following instruments qualifies as Common Equity Tier 1 capital under Basel III?
- A bank has Tier 1 capital of USD 45 million, total on-balance-sheet exposures of USD 900 million, and off-balance-sheet items with credit-co…
- A bank has HQLA of USD 18 billion. Under a 30-day stress scenario, projected cash outflows are USD 40 billion and projected cash inflows are…