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      Question

      The 'Internal Capital Adequacy Assessment Process'

      (ICAAP) is a requirement under which Pillar of Basel II/III?
      A Pillar 1 (Minimum Capital Requirements). Correct Answer Incorrect Answer
      B Pillar 2 (Supervisory Review Process). Correct Answer Incorrect Answer
      C Pillar 3 (Market Discipline). Correct Answer Incorrect Answer
      D Pillar 4 (Environmental Standards). Correct Answer Incorrect Answer
      E It is not part of the Basel framework. Correct Answer Incorrect Answer

      Solution

      Pillar 2 requires banks and FIs to have an internal process (ICAAP) to assess their overall capital adequacy in relation to their risk profile, which the regulator (RBI) then reviews. The Internal Capital Adequacy Assessment Process (ICAAP) is a requirement under Pillar II (Supervisory Review Process) of the Basel II and Basel III frameworks. It requires banks to identify, assess, and maintain adequate internal capital to cover all material risks, including those not fully captured under the minimum requirements of Pillar I. 

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