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    Question

    What is the purpose of the 'Leverage Ratio' in Basel

    III? 
    A To measure interest rate sensitivity Correct Answer Incorrect Answer
    B To act as a non-risk-based backstop to risk-based capital requirements Correct Answer Incorrect Answer
    C To calculate the probability of default Correct Answer Incorrect Answer
    D To manage the flow of credit to priority sectors Correct Answer Incorrect Answer
    E To determine the dividend payout ratio Correct Answer Incorrect Answer

    Solution

    The Leverage Ratio is a non-risk-based ratio (Tier 1 Capital / Total Exposure) intended to constrain the build-up of leverage in the banking sector.

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