There Are Three Pillars of Basel II

question 56

Multiple Choice

There are three pillars of Basel II.One of them is to make market discipline a powerful force compelling risky banks to lower their risk exposure.What does Basel II want to do to make this happen?

• A)Require minimum capital requirement based on the bank's own evaluation of its risk.
• B)Require greater public disclosure of each bank's true financial condition.
• C)Expand the risks to be evaluated to include credit risk market risk,and operational risk.
• D)Require a supervisory review of each bank's risk evaluation procedures.
• E)All of the options are correct.

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Definitions:

Edgeworth Box

A diagram used in economics to show the distribution of resources and the potential gains from trade between two individuals in a pure exchange economy.

Contract Curve

The contract curve represents a set of efficient allocations in the Edgeworth Box, where no participant could be made better off without making another participant worse off.

Pareto Optimal

A condition or situation in which it is impossible to make one party better off without making another party worse off, reflecting an optimal distribution of resources.

Initial Endowment

In economic theory, refers to the initial quantities of various assets or goods that an individual or entity possesses.