The Liquidity Coverage Ratio Imposed by Basel III Requires a Bank

question 295

Multiple Choice

The Liquidity Coverage Ratio imposed by Basel III requires a bank:

• A) to keep enough highly liquid assets to cover its net liabilities for the next 10 days to guard against severe liquidity stress
• B) to keep enough highly liquid assets to cover its net liabilities for the next 30 days to guard against severe liquidity stress
• C) to keep enough highly liquid assets to cover its net liabilities for the next 60 days to guard against severe liquidity stress
• D) to retain enough liquidity to cover its assets against severe default risk

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Definitions:

Marginal Revenue

The extra revenue received from the sale of an additional unit of a product or service.

Competitive Price-searcher

A market participant who actively seeks out the best price for goods or services among various competitors.

Product Variety

Product variety refers to the assortment of different goods and services that a company offers to meet varying customer needs and preferences.

Higher Prices

A scenario where the cost of goods or services rises, which can be due to increased demand, reduced supply, or inflation.