Cemap 1 - Topic 19

Front 1

Who is responsible for the Prudential regulation of deposit takers and insurers?

Back 1

Prudential regulation authority

Front 2

Why does the FCA concentrate on managing the failure of an individual firm if it happens rather than proactively seeking to prevent it's failure in the first place?

Back 2

The FCA is the Prudential supervisor for smaller firms that, in general, would not present a risk to the wider financial system. The regulator concentrated resources are managing affirms failure in an orderly way to mitigate the impact on its customers

Front 3

Capital adequacy requirements are based on the principle that in the event of a firm making a loss:

Back 3

Capital adequacy requirements are based on the principal that shareholders, not depositors, should bear any loss.

Front 4

What is a bank's solvency ratio??

Back 4

Capital as a percentage of the risk adjusted value of assets

Front 5

How long did basel 2 take to ensure the capital adequacy requirements more accurately reflected the risks represented by firms assets?

Back 5

Firms were required to categorise each asset according to the risk it represented and hold more capital in relation to the risky assets

Front 6

Under Basel 3, banks in the EU must work toward a minimum solvency ratio of what level?

Back 6

10.5%

Front 7

Basel 3 introduced new measures with regard to a bank's capital and asset liability management. Which of these measures is aimed at protecting the long-term financial stability of a bank?

Back 7

The net stable funding ratio

Front 8

What are the aims of solvency 2?

Back 8

To reduce the risk of an insurance company being unable to meet its claims, reduce the loss to policy holders, disclose information to make regulators aware of potential problems at an early stage. Promote confidence in the financial stability of the insurance sector.

Front 9

What section of the FCA handbook contains details of the Prudential requirement supply to? MIFID investment firms?

Back 9

MIFIDPRU details the potential requirements for MIFID investment firms

Front 10

What is meant by 'Capital adequacy'?

Back 10

Ensuring that a business holds sufficient reserves of capital to ensure it is sustainable.

Front 11

Explain what is meant by 'Liquidity Risk'?

Back 11

What happened to Northern Bank In 2007. The bank had a business plan that involved borrowing money short-term on the money market on a regular basis. Is no longer became available and then they had to go to the Bank of England for assistance.

Front 12

What is Prudential management?

Back 12

A vital element of the work of the industry regulators is to ensure that firms have adequate risk management systems in place, particularly in relation to financial risks. This is referred to as Prudential management. Prudential standards operate at various levels.

Front 13

Where are the three pillars of Basel 2?

Back 13

Pillar 1- details capital requirements in three aspects of banks operations:Credit risk, operational Risk & Market Risk

Pillar 2- Gives banks more supervisory tools & enables them to deal with individual components of risk.

Pillar 3- Disclosure requirements so that capital adequacy of an organisation can be properly assessed.

Front 14

Basel 3 came into place when and why?

Back 14

After the credit crunch, around 2010-2011. It covers two main areas:

-Regulatory Capital.

-Asset & Liability management.

Front 15

Total loss absorbing capacity (TLAC) requirements apply to:

Back 15

Globally systematically important banks.

GSIBS - The largest banks in the world which would impact if they failed.

Front 16

The Basel committee acts under the auspices of the:

Back 16

Bank for international settlements.

Front 17

When looking at Capital adequacy', a firms solvency ratio is:

Back 17

Capital as a percentage of its risk-adjusted assets.

Front 18

The Basel 3 net stable funding ratio, requires that a bank's:

Back 18

Long term financial resources exceed long-term commitments.

Front 19

Basel 3 liquidity coverage ratio requires a bank's available high quality liquid assets to exceed the net cash outflows expected over the next:

Back 19

30 days.

Front 20

What does the capital Requirements Directives(CRDs) apply to:

Back 20

Banks, building societies & investment companies.

Front 21

What does Basel 3 requires bank to reach a minimum solvency ratio of?

Back 21

10.5%

Front 22

What is Basel 3 leverage ratio?

Back 22

Banks are expected to maintain a leverage ratio in excess of 3%