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    Question

    Which of the following are not the components of Tier 1

    (Primary Capital) for maintaining the requirements as per BASEL regulations
    A Common shares (paid-up equity capital) issued by the bank Correct Answer Incorrect Answer
    B Share Premium Correct Answer Incorrect Answer
    C Statutory Reserves Correct Answer Incorrect Answer
    D Revaluation Reserve Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Elements of Common Equity component of Tier 1 capital will comprise the following:

    1. Common shares (paid-up equity capital) issued by the bank
    2. Stock surplus (share premium) resulting from the issue of common shares;
    3. Statutory reserves;
    4. Capital reserves representing surplus arising out of sale proceeds of assets;
    5. Revaluation reserves arising out of change in the carrying amount of a bank’s property consequent upon its revaluation may, at the discretion of banks, be reckoned as CET1 capital at a discount of 55%
    Therefore, all are included.

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