Question #16
Reading: Reading 11 Analysis of Financial Institutions
PDF File: Reading 11 Analysis of Financial Institutions.pdf
Page: 6
Status: Incorrect
Correct Answer: B
Your Answer: A
Question
Basel III regulation that aims to prevent banks from assuming so much leverage that they are unable to withstand loan losses is most correctly described as the:
Answer Choices:
A. stable funding requirement
B. minimum liquidity requirement
C. minimum capital requirement
Explanation
The minimum capital requirement specifies a ratio of assets to risk-weighted assets to
ensure the balance sheet is robust enough to cope with loan losses. Stable funding
requirements specify the amount of stable funding relative to liquidity needs over a one-
year horizon. The minimum liquidity requirement specifies a minimum level of liquidity to
cover a partial loss of funding sources or outflow due to off balance sheet commitments.