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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.
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.
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.
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.
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.
MiFID applies to insurance companies. True or false?
False.
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