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      Question

      Consider the following statements about Basel III

      norms: 1. Pillar 2 focuses on Supervisory Review Process. 2. Common Equity Tier 1 (CET1) is the highest quality of bank capital. 3. The Net Stable Funding Ratio (NSFR) is a short-term liquidity tool for 30 days. Which of the statements above is/are correct? 
      A 1 and 2 only Correct Answer Incorrect Answer
      B 2 and 3 only Correct Answer Incorrect Answer
      C 1 and 3 only Correct Answer Incorrect Answer
      D 1, 2, and 3 Correct Answer Incorrect Answer
      E 2 only Correct Answer Incorrect Answer

      Solution

      Statement 3 is incorrect. NSFR is a long-term liquidity ratio (over a 1-year horizon), while the Liquidity Coverage Ratio (LCR) is for the 30-day stress period.

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