13.2 Regulation

Why are bank failures considered to have a greater effect on the economy than other types of business failures? Do you agree with this conclusion?

13.5 Legislation

What are the main pieces of regulation that influence the financial sector? Outline the role of each.

13.7 Bank liquidity

How does the prudential framework manage the liquidity risk of regulated institutions?

13.9 Capital adequacy

What is meant by 'capital adequacy' for financial institutions and why is it so important?

13.11 CAR

Calculate the CAR for the institution below (only for credit risk) and determine if it is meeting its regulatory obligations.

Asset Cash Government secunes Loans mortgages Other loans Other assets Value 1 000 5 000 40 000 10 000 5 000 Total riskadjusted assets Regulatory capital CAR Weight Risk adjusted asset Capital Equity 1 000 Retained earnings 500 General reserve 300 Preference shares 200 Perpetual cumulative 600 subordinated debt Total capital Tier 1/tier 2 Tier