Basel III MCQ | JAIIB Principles & Practices of Banking MCQ

May 28, 2021
Basel-III MCQ JAIIB

Here is the next quiz in the quiz/MCQ series for Principles and Practices of Banking subject of JAIIB. This post covers the topics of Basel III MCQ. Answers are given at the end of each question.

Q1. In which year did BASEL-III guidelines were released by BCBS?  
  1. 2005
  2. 2008
  3. 2010
  4. 2012

Answer: (3)
In 2010, Basel III guidelines were released. These guidelines were introduced in response to the financial crisis of 2008

Q2. BASEL-III was implemented in India in phased manner with effect from _____?
  1. 1st April, 2013
  2. 1st April, 2014
  3. 1st April, 2015
  4. 1st April, 2016

Answer: (1)
These global capital to risk norms, called Basel III capital regulation, are being implemented in phased manner by Reserve Bank of India since April 1, 2013. They are to be fully implemented as on March 31, 2019. The Reserve Bank of India (RBI) has deferred implementation of provisions made under Basel III capital due to uncertainty related to COVID crisis. In this regard, RBI will repel the final tranche of the capital conservation buffer (CCB) and the implementation of net stable funding ratio (NSFR) by six months i.e. April 1, 2021. Considering the continuing stress on account of COVID-19, and in order to aid in the recovery process, it has been decided to defer the implementation of the last tranche of the CCB of 0.625 per cent from April 1, 2021 to October 1, 2021

Q3. What is the capital conservation buffer that banks have to maintain as per BASEL-III framework?  
  1. 1%
  2. 2.5%
  3. 3%
  4. 4.5%

Answer: (2)
The capital conservation buffer (CCoB) is a capital buffer of 2.5% of a bank’s total exposures that needs to be met with an additional amount of Common Equity Tier 1 capital

Q4. What is the range of Counter Cyclic Buffer as per BASEL-III framework? 
  1. 0% – 1%
  2. 0% – 1.5%
  3. 0% – 2%
  4. 0% – 2.5%

Answer: (4)
A counter cyclical capital buffer would raise banks’ capital requirements during economic expansions, with banks required to maintain a higher capital-to-asset ratio when the economy is performing well and loan volumes are growing rapidly. The countercyclical capital buffer will range from zero to 2.5% of risk-weighted assets

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Q5. What is the minimum Tier-I capital, banks have to maintain as per Basel-III framework?
  1. 3%
  2. 4%
  3. 5%
  4. 6%

Answer: (4)
The Tier 1 capital requirement is 6% in Basel III. The 6% includes 4.5% of Common Equity Tier 1 and an extra 1.5% of additional Tier 1 capital

Q6. What is the minimum Common Equity Tier-I capital, banks have to maintain as per Basel-III framework?
  1. 4%
  2. 4.5%
  3. 6%
  4. 7%

Answer: (2)
Under Basel III, the minimum Common Equity Tier 1 increased to 4.5%

Q7. What is the minimum total capital including CCB that banks have to maintain as per Basel-III framework? 
  1. 8%
  2. 9%
  3. 10%
  4. 10.5%

Answer: (4)
Under Basel III guidelines are banks are required to maintain minimum common Equity Tier I (CET1) capital of 10.5% (8% without counter cyclical buffer)

Q8. What is the minimum total capital that banks have to maintain as per Basel-III framework?
  1. 7%
  2. 8%
  3. 9%
  4. 10%

Answer: (2)
Under Basel III, the minimum capital adequacy ratio that banks must maintain is 8%

Q9. RBI has deferred the implementation of provisions made under Basel III capital due to uncertainty related to Covid crisis till ____?
  1. 1st October 2021
  2. 1st January 2022
  3. 1st April 2022
  4. 1st October 2022

Answer: (1)
Considering the continuing stress on account of COVID-19, and in order to aid in the recovery process, it has been decided to defer the implementation of the last tranche of the CCB of 0.625 per cent from April 1, 2021 to October 1, 2021

Q10. What is the minimum total capital that Indian banks have to maintain as per Basel-III framework?
  1. 7%
  2. 8%
  3. 9%
  4. 10%

Answer: (2)
Under Basel III, the minimum capital adequacy ratio that Indian banks must maintain is 9%

Q11. What is the minimum total capital including CCB that Indian banks have to maintain as per Basel-III framework?
  1. 10%
  2. 10.5%
  3. 11%
  4. 11.5%

Answer: (4)
Under Basel III guidelines are banks are required to maintain minimum common Equity Tier I (CET1) capital of 11.5% (9% without counter cyclical buffer)

Q12. What is the minimum Common Equity Tier-I capital, Indian banks have to maintain as per Basel-III framework?
  1. 4%
  2. 4.5%
  3. 5.5%
  4. 7%

Answer: (3)
Under Basel III, the minimum Common Equity Tier 1 that Indian banks have to maintain is 5.5%

Q13. What is the minimum requirement of leverage ratio for the banks as per Basel-III?
  1. 4%
  2. 3%
  3. 2%
  4. 1%

Answer: (2)
Basel III established a 3% minimum requirement for the Tier 1 leverage ratio, while it left open the possibility of increasing that threshold for certain systematically important financial institutions.

Q14. The minimum Leverage Ratio should be ____ for Domestic Systemically Important Banks (DSIBs) and ___ for other banks as per RBI Guidelines
  1. 4%, 3.5%
  2. 4%, 3%
  3. 4.5%, 4%
  4. 4.5%, 3.5%

Answer: (1)
The minimum Leverage Ratio shall be 4% for Domestic Systemically Important Banks (DSIBs) and 3.5% for other banks

Q15. Under Liquidity Coverage Ratio (LCR), banks are required to hold an amount of high-quality liquid assets that’s enough to fund cash outflows for ____ days. 
  1. 10
  2. 15
  3. 20
  4. 30

Answer: (4)
The LCR promotes short-term resilience of banks to potential liquidity disruptions by ensuring that they have sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario lasting for 30 days

Q16. What is the minimum Net Stable Funding Ratio (NSFR) that banks have to maintain in on-going basis?
  1. 100%
  2. 110%
  3. 125%
  4. 150%

Answer: (1)
The Net Stable Funding Ratio (NSFR) promotes resilience over a longer-term time horizon by requiring banks to fund their activities with more stable sources of funding on an ongoing basis. The objective of NSFR is to ensure that banks maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities. NSFR should be equal to at least 100% on an ongoing basis

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