QUESTION 6

Consider a bank that has an actual CET1 risk-weighted ratio of 4% in a country with a 2.5% conservation buffer and a 1% countercyclical buffer. Under Basel III rules, _________________________.

	A.	the regulator does not impose any restrictions to the bank.
	B.	the regulator imposes some limitations on the bank's asset growth.
	C.	the regulator imposes restrictions on the bank's distribution of bonuses and dividends.
	D.	The regulator imposes that the bank go bankrupt.
	E.	The regulator imposes that the bank expand its assets.

QUESTION 7

In January 2020, a bank purchases a government bond for $102 as a source of future income through coupons. Due to economic conditions, in April 2020, the price of the bond has fallen to $97. The price remains unchanged between April 2020 and June 2020, where the bond is then sold.

We consider the story above in two different systems: the historical value accounting system and the mark-to-market accounting system.

Which of the following statements is CORRECT?

	A.	Only under the mark-to-market accounting system will there be an unrealised capital gain of -$5 in June.
	B.	Only the balance sheet entry for the purchase transaction is identical under both systems.
	C.	The balance sheet entries under both accounting systems will be identical at all stages.
	D.	The balance sheet entries under both accounting systems will be different at all stages.
	E.	None of the above statements are correct.