Exam 5: Depository Institution Capital Management

A) Enhancing minimum capital and liquidity requirements that includes a higher overall capital requirement, a narrower definition of qualifying regulatory capital, higher capital charges for banking book and trading book exposures, a new leverage ratio, and a liquidity coverage ratio and net stable funding ratio
B) Enhanced Supervisory Review Process for firms with risk management and capital planning
C) Enhanced risk disclosure and market discipline
D) Redefining common equity Tier 1 (CET 1) capital, and additional Tier 1 capital, implementing a new capital conservation buffer requirement and increasing capital requirements for banks and making certain bank activities more capital intensive than in the past
E) All of the above

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A) It is added to Basel III to ensure that large international banks
Build up a capital buffer in favorable periods that can be drawn upon later in unfavorable periods when losses occur.
B) When large international banks draw down on this buffer, banks are required to rebuild it by reducing distributions of earnings that are discretionary, such as reducing dividend payments, or bonus payments to managers and staff or raising new external equity capital.
C) The Basel III capital conservation buffer of 2.5% phased in by January 1, 2019 comprised of Common Equity Tier 1 capital provides a regulatory minimum capital requirement as a buffer against losses in addition to other capital requirements.
D) All of the above.

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