Q. Consider the following statements:
1.The minimum Capital to Risk-Weighted Assets Ratio (CRAR) requirement under Basel III norms is 11%.
2.Common Equity Tier 1 (CET1) capital shows the bank’s core capital available to absorb losses.
Which of the statement(s) given above is/are correct?
Answer: B
Notes:
Explanation –
Statement 1 is incorrect. Basel III mandates that banks must maintain a minimum total capital adequacy ratio of 8%. However, with the additional capital conservation buffer, the total requirement increases to 10.5%.
Statement 2 is correct. Common Equity Tier 1 (CET1) capital refers to a bank’s core capital, which is available to absorb losses and is considered the highest quality of regulatory capital. CET1 must be at least 4.5% of risk-weighted assets under Basel III.
Source: The Hindu
