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6 Cards in this Set
- Front
- Back
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Explain the minimum capital adequacy requirements for a bank.
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The minimum capital adequacy requirements are specified in terms of a bank’ssolvency ratio. A bank is required to keep a solvency ratio of at least 7 per cent.Its own funds must amount to at least 7 per cent of its risk‑weighted assets. ‘Ownfunds’ means the bank’s paid‑up share capital, plus any retained profits. |
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Under the Capital Requirements Directive (CRD), what is the capital requirement foran adviser who gives investment advice but does not hold client money? |
Advisers who give investment advice are subject to a capital requirement of €125,000,with a reduction to €50,000 if they do not hold client money or assets. |
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A life company has liabilities of £50m and carries some investment risk on itspolicies. In order to meet its minimum solvency margin, what must its assets beworth? |
Its assets must be worth at least £52m. |
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Which of the following two statements is true?1. The Solvency Capital Requirement (SCR) is the risk‑based capital required toensure that there is a probability of at least 95.5% that the firm will be able to meetits obligations over the next 12 months. 2. The Minimum Capital Requirement (MCR) is set at a probability of 85% that thefirm will be able to meet its obligations over the next 12 months. |
Statement 1 is false. The Solvency Capital Requirement (SCR) is the risk‑based capitalrequired to ensure that there is a probability of at least 99.5 per cent that the firmwill be able to meet its obligations over the next 12 months. Statement 2 is true. TheMinimum Capital Requirement (MCR) is set at a probability of 85 per cent that thefirm will be able to meet its obligations over the next 12 months. |
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What is the purpose of the Markets in Financial Instruments Directive (MiFID)? |
The purpose of MiFID is to ensure that: a firm that is subject to MiFID has the right to operate throughout the EuropeanEconomic Area through a ‘single passport’ based on single authorisation in itshome state; there is a high and consistent level of home state regulatory control. |
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MiFID applies to insurance companies. True or false? |
False. |
