BALANCE SHEET MANAGEMENT MODULE D

1). As per BASEL-II, tier-3 capital is allowed to meet which additional category of risk: market risk
2). Money at call and short notice includes all loans made in the interbank call money market that is
repayable within 15 days notice.
3). Net interest income (NII): interest income interest expenses
4). Net interest margin (NIM): net interest income / average total assets
5). Net interest margin can be viewed as the spread on earning assets.
6). the ratio of the shareholders funds to the total assets measures the shifts in the ratio of owned funds
to total funds. This fact assesses the sustenance capacity of the bank.
7). Price matching basically aims to maintain spreads by ensuring that deployment of liabilities will be at
a rate higher than the costs.
8). Price matching exercise would indicate whether the institution is in a position to benefit from rising
interest rates by having a positive gap (assets>liabilities) or whether it is in a position to benefit from
declining interest rates by a negative gap (liabilities>assets).
9). the banks balance sheet comprises of sources and uses of funds liabilities and net worth from the
sources of the bank funds, where as assets represent uses of funds to generate revenue for the bank.
10). Systemic risk is the risk that a default by one financial institution will create a ripple effect that
leads to defaults by other financial institutions and threatens the stability of the financial system.
11). in calculating the Cooke ratio both on balance sheet and off balance sheet items are considered.
The ratio is used to calculate banks total risk-weighted assets. It is a measure of the banks total credit
exposure.
12). A borrower is required to pay part of principal and accrued interest every month as per loan
agreement. He is promptly paying interest every month, but not paying principal for the past four
months. The account will be classified as sub standard asset.
13). Pillar 1 of capital framework relates to: minimum capital requirements.
14). Pillar-3 of capital framework relates to: market discipline.
15). CRAR: capital to risk weighted assets
16). CAR: capital adequacy ratio
17). for calculating the capital charge for credit risk under standardized approach, an unrated bank will
be assigned 100% risk weight.
18). the concept of expected loss (EL) and UN expected loss (UL) are used in calculating capital charge on
operational risk.
19). As per RBI guidelines, when did the Indian banks with overseas presence and foreign banks in India
migrate to BASEL-II guidelines? 31-03-2008
20). Banks are required to accumulate data for five years before it can use for internal models in
calculate capital charge for operational risk.