Posted: December 24th, 2015

Money and Capital markets

An important part of the regulatory controls over banks is the capital adequacy requirement. The forces banks to maintain sufficient risk-adjusted capital to support the credit risk they assume in their lending portfolios.

Below is breakdown of the assets held by Geelong Bank.

Required:

  1. Calculate Geelong Bank’s capital adequacy requirement
  2. According to Basel II, how much of their capital adequacy is required to be held as tier 1 capital?
  1. Under the proposed Basel III, there are two new liquidity standards. Define and discuss the rationale for these new standards.

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