［2008］Topic 71: Basel Reference Readings相关习题 situation, framework, insurance, business

nayizhenfeng

 

AIM 1: Discuss the scope of the Basel II Accord and how it applies to various bank subsidiaries or business relationships.

 

1、MainBank is a bank holding company with two subsidiaries, ElmBank and OakBank. ElmBank is an internationally active bank. OakBank is also an internationally active bank, and OakBank has an insurance subsidiary. The application of the Basel II framework in this situation should be to:

  I. ElmBank on a stand alone basis.

 II. MainBank on a consolidated basis.

III. OakBank’s insurance subsidiary on a stand alone basis.

IV. Oak Bank without consolidating the insurance subsidiary.

A) I and III only. 

B) III only.  

C) I and II only. 

D) I, II, III and IV. 

nayizhenfeng

 

The correct answer is C

 

Related businesses such as insurance should be consolidated. The Accord calls on supervisors to look at not only the holding company, but also at each individual banking subsidiary to assure that the depositors of those subsidiaries are adequately protected by capital.

nayizhenfeng

 

2、The Basel II Capital Accord corrected many of the deficiencies of Basel I. Which of the following statements is NOT accurate?

A) Basel I did not recognize the effects of diversification. 

B) Basel I did not recognize off-balance sheet activities. 

C) Basel II included a new role for supervisors. 

D) Basel II did not prevent the double counting of capital.

nayizhenfeng

 

The correct answer is D

 

The Basel II Accord covers any holding company that may be the parent of other entities involved in banking activities, and it looks at the entire group on a consolidated basis. The idea is to include the risks held at any level of a multilevel banking group and to prevent the double counting of capital.

nayizhenfeng

 

3、If an internationally active bank holding company has subsidiaries engaged in insurance activities:

A) those subsidiaries should be consolidated, and minimum capital requirements should be adjusted to reflect their risk. 

B) those subsidiaries should not be consolidated, and no adjustment to minimum capital requirements is necessary. 

C) those subsidiaries should be consolidated, but with no adjustment to minimum capital requirements. 

D) those subsidiaries should not be consolidated, but minimum capital requirements should be adjusted to reflect their risk.

nayizhenfeng

 

The correct answer is A

 

All of the bank holding company’s related business operations should be consolidated, and the risk of those subsidiaries should be reflected in adjustments to capital requirements.

nayizhenfeng

 

AIM 2: Define the types of capital, and discuss how each type is used to meet capital requirements under Basel II.

1、Tier 3 capital can be used to satisfy capital requirements resulting from:

A) market-risk charges only. 

B) credit-risk charges only. 

C) market-risk and credit-risk charges. 

D) only certain types of credit-risk charges.

nayizhenfeng

 

The correct answer is A

 

Tier 3 capital can only be used to satisfy capital requirements resulting from market-risk charges and cannot be applied to credit-risk charges.

nayizhenfeng

 

2、The balance sheet for James Bankholdings as of December 31, 2004 included the following items ($000):

Preferred Stock (noncumulative)                                  $800,000 

CommonStock                                                $1,200,000 

RetainedEarnings                                              $3,000,000 

Unrealized gains on long term Equity holdings                       $750,000

Based only on this information, estimate the Tier 1 and Tier 2 capital of James Bankholdings as of 12/31/04 (use $000):

      Tier 1                                  Tier 2

A) $5,000,000                                 $750,000

B) $4,200,000                               $800,000

C) $4,200,000                              $1,550,000

D) $5,000,000                                  $0

nayizhenfeng

 

The correct answer is A

 

Tier 1 capital includes common stock, retained earnings and noncumulative preferred stock. Tier 2 capital would include the unrealized gains on long term investments.