Bank XYZ has
Common shares - 500cr
Statutory reserves - 250cr
Capital reserves - 300cr
Balance in P&L Account at the end of the previous FY - 150cr
Revaluation reserves - 200cr
Provisions and Loss Reserves - 300cr
Debt Capital Instruments - 200cr
Perpetual Debt Instruments (PDI) - 50cr
Perpetual Cumulative Preference Shares (PCPS) - 50cr
Redeemable Cumulative Preference Shares (RCPS) - 50cr
RWA for credit and operational risk are Rs 12000cr
RWA for market risk Rs 5000cr
Based on the above information, answer the following questions?
1. what is the amount of Tier-1 capital?
a. 1080cr
b. 1140cr
c. 1250cr
d. 1380cr
Ans - c
Tier-1 = Common shares + Statutory reserves + Capital reserves + Balance in P&L Account at the end of the previous FY + Perpetual Debt Instruments (PDI)
= 500+250+300+150+50
= 1250cr
2. Calculate the amount of Tier-2 capital?
a. 350cr
b. 475cr
c. 540cr
d. 840cr
Ans - c
Tier2 = Provisions and Loss Reserves maximum 1.25% of risk weighted assets + Debt Capital Instruments + Revaluation reserve at 55% discount + PCPS + RCPS
= (12000*1.25%) 150+200+(200*45%,at 55% discount)90+50+50
= 540cr
3. Calculate the amount of capital fund?
a. 1250cr
b. 1380cr
c. 1560cr
d. 1790cr
Ans - d
Total capital fund = Tier-1 capital + Tier-2 capital
= 1250 + 540 = 1790cr
4. What is the capital adequacy ratio of the bank?
a. 10.20 %
b. 10.53 %
c. 11.03 %
d. 11.53 %
Ans - b
Capital adequacy ratio = Total Capital fund / Total RWA
= 1790 / 17000
= 10.53 %
5. What is the amount of minimum capital to support credit and operational risk as per Basel 3 without capital conservation buffer?
a. 1080cr
b. 1140cr
c. 1250cr
d. 1380cr
Ans - a
= 12000 * 9% = 1080cr
6. What is the amount of minimum capital to support credit and operational risk as per Basel 3 with capital conservation buffer?
a. 1080cr
b. 1140cr
c. 1250cr
d. 1380cr
Ans - d
12000 * 11.5% = 1380cr
7. What is the amount of minimum Tier 1 to support the credit and operational risk without capital conservation buffer?
a. 350cr
b. 475cr
c. 540cr
d. 840cr
Ans - d
Tier 1 = 12000 * 7% = 840 cr
8. What is the amount of minimum Tier 1 to support the credit and operational risk with capital conservation buffer?
a. 1080cr
b. 1140cr
c. 1250cr
d. 1380cr
Ans - b
Tier 1 = 12000 * 9.5% = 1140 cr
9. What is the amount of minimum Tier 1 to support the market risk without capital conservation buffer?
a. 350cr
b. 475cr
c. 540cr
d. 840cr
Ans - a
Tier 1 = 5000 * 7% = 350 cr
10. What is the amount of minimum Tier 1 to support the market risk with capital conservation buffer?
a. 350cr
b. 475cr
c. 540cr
d. 840cr
Ans - b
Tier 1 = 5000 * 9.5% = 475 cr
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