Question

Pillar I of Basel III covers 3 types of risks. Which of the following is not one among them?

A Market risk Correct Answer Incorrect Answer
B Credit risk Correct Answer Incorrect Answer
C Operational risk Correct Answer Incorrect Answer
D Liquidity risk Correct Answer Incorrect Answer
E C and D Correct Answer Incorrect Answer

Solution

Pillar 1 of Basel III norms talks about minimum capital adequacy for banks. To arrive at the minimum capital requirement, 3 risks are considered which include credit risk, market risk and operational risk. Liquidity risk is not considered for capital adequacy purpose. However it is separately tracked and managed with help of 2 new ratios introduced by Basel III norms – Liquidity coverage ratio (LCR) and Net Stable funding ratio (NSFR).

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