W 5

Question 1

Securitization is the process of…

Answer 1

…transforming illiquid assets into marketable securities.

Question 2

What is SRISK?

Answer 2

The shortage in equity capital that the company would have if a crisis
occurs.

Question 3

SOS: What does it mean that regulators impose a prudential capital ratio of k=10%.?

Answer 3

Regulators demand to have 10% of equity against the total exposure of the company is a crisis.

Question 4

What are the regulatory goals of Basel 3?

Answer 4

• Go from macro to micro prudential approach: reducing procyclicality induced by regulation, taking into account that some institutions are too systemic to fail.
• Increase the quality of capital required
• Increase the amount of capital required

Question 5

The banks can get below under the capital conservation buffer, but they get penalized for that. If the capital goes below normal requirements then:

Answer 5

• The bank cannot pay bonuses
• The bank cannot buy back shares
• The bank must retain at least x% of profits, instead of paying dividends

Question 6

What is the Liquidity coverage ratio LCR?

Answer 6

The liquidity coverage ratio is a narrow banking type of regulatory solution that is forcing banks to have more assets liquid so they can reasonably cope with the outflows they expect

Question 7

The Net stable funding ratio NSFR This was installed to:

Answer 7

limit the reliance on short term funding (bank run like risks)

Question 8

Net stable funding ratio NSFR =

Answer 8

Available Stable funding (Liabilities * ASF) / Required Stable funing (Assets * RSF)