Severe financial crises results in systemic risks in banking and financial markets which highlights the importance of the banking sector to maintain sufficiently high level of risk-based capital to withstand financial losses.

(i) Why capital risk management is one of the main concerns for treasury management? (10M)

(ii) Is capital risk isolated from other risks? Explain based on any financial crisis. (5M)

(iii) What are the components of Tier 2 capital under Basel 3 guidelines? (5M)