Capital and Liquidity

Question 1

What does CAMELS stand for

Answer 1

Capital Adequacy
Assets
Management
Earnings
Liquidity
Sensitivity to market risk

Question 2

What does capital measure?

Answer 2

the amount of losses an institution can suffer before impairing obligations to creditors.

Question 3

Three pillars

Answer 3

minimum capital requirements, supervisory review, market discipline.

Question 4

Basel III Expanded First Pillar

Answer 4

Capital, risk coverage, containing leverage

Question 5

Liquidity Coverage Ratio

Answer 5

Forces financial institutions to have high enough liquid assets to cover 30 days of obligations.

Question 6

Liquidity coverage ratio numerator

Answer 6

Levels 1, 2A, and 2B assets, with the 2 assets subject to haircuts

Question 7

Liquidity Coverage ratio denominator

Answer 7

Total net cash outflow

Question 8

Basel II changes

Answer 8

Allowed banks to calculate their own risks – institutional market based assessments.