80.2K

Verified Solution

Link Copied!

The South African government has adopted the 'Twin Peaks' approach to financial regulation. What does this mean? a. The South African Reserve Bank will be responsible for prudential regulation, and the Financial Sector Conduct Authority will be responsible for consumer protection. o b. The South African Reserve Bank will monitor market risk and credit risk, while the Financial Sector Conduct Authority will monitor operational risk. O c. The South African Reserve Bank will monitor credit risk while the Financial Sector Conduct Authority will monitor systemic risk. O d. The South African Reserve Bank will be responsible for monitoring the capital adequacy requirements of banks, while the Financial Sector Conduct Authority will monitor the liquidity requirements of banks. A commercial bank is reprimanded by the country's central bank to adjust its cash reserve ratio, which is below the required minimum of 2.5%. What function is portrayed by the central bank? a. Lender of last resort O b. Implementation of monetary policy C. Money creation O d. Bank supervision The Basel | Accord was introduced in 1988 and it focused on the total amount of bank capital and credit risk in general. An amendment to Basel I (it remained Basel I) was introduced in 1996. What did this amendment introduce? O a. It introduced reduced leverage through the introduction of a backstop leverage ratio. o b. It introduced a focus on market risks and, for the first time, allowed some banks to use their internal systems to measure market risks. O c. It introduced three pillars, i.e. minimum capital requirements, a supervisory review process, and the effective use of market discipline. d. It introduced only one option for measuring the appropriate capital of internationally active banks. In terms of Basel III, the leverage ratio was introduced as a non-risk sensitive backstop measure to reduce the risk of build-up of excessive leverage in the banking system. If Bank A have on-balance sheet assets of R100 million, off- balance sheet assets of R20 million, and risk weighted assets of R80 million, and the current leverage ratio is 3%, what is the capital that Bank A should hold? a. R5.4 million O b. R2.4 million O c. R3.6 million O d. R3 million

Answer & Explanation Solved by verified expert

See Answer