3I0-012 Certification Exam Questions with AI Explanations

Which of the following statements about leverage ratios under Basel III is correct?

The leverage ratio is the ratio of the bank’s Tier 1 Capital to total assets of the bank, excluding its off- balance sheet exposures and derivatives.
The purpose of introducing a leverage ratio is to avoid the build-up of excess leverage that could potentially lead to a “credit crunch” in stressed conditions.
The leverage ratio under Basel III must be higher than 4%.
The leverage ratio is the ratio of the bank’s Tier 1 and Tier 2 Capital to total assets of the bank, including its off-balance sheet exposures and derivatives.

Answer(s): B

Complete the following sentence. If a bank has an asset repricing in 6 months funded by a liability repriced in 3 months:

Answer(s): A

The Liquidity Coverage Ratio (LCR) in Basel III:

is a new rule that compares liquid asset levels in banks to their available equity capital
spells out a modernized system for calculating the required minimum reserve that banks must hold at the central bank
compares liquid and reliably liquidating assets to expected cash outflows from specified run-off rates for various liability classes under a short-term stress scenario
tied directly into the internal ratings-based approach for determining the liquidity of creditcounterparties

Answer(s): B

What is interest rate immunization in the context of bank gap management?

the strategy of holding more interest rate sensitive assets than interest rate sensitive liabilities
the strategy of holding fewer interest rate sensitive assets than interest rate sensitive liabilities
reducing the size of the balance sheet
structuring a bank’s portfolio so that its net interest revenue and/or the market value of its portfolio will not be adversely affected by changes in interest rates

Answer(s): C