Multiple choice

As per Basel 2 recommendations, the Tier 3 is limited to ___ % of a bank’s Tier 1 capital that is required to support market risk.

  1. 500

  2. 250

  3. 100

  4. 50
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Banks may, at the discretion of the National Authority, employ 3rd tier of capital consisting of short term subordinate debts for the sole purpose of meeting a proportion of capital requirements for market risks. Tier III capital will be limited to 250% of bank’s Tier I capital (minimum of 28.5%) that is required to support market risks.

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