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:

Dividends Received

Payments made to shareholders out of a corporation's earnings, representing a share of the profits.

Unrealized Gains

Increases in the value of an asset that has not been sold, and thus the gain has not been "realized" through a transaction.

Comprehensive Income

The total change in equity for a business enterprise during a period from transactions and other events from non-owner sources.

Available-For-Sale Securities

Financial investments that a company holds with the intent of selling for a profit but are not actively traded or held to maturity.