Chapter 18 Testbank

1.

The net worth is a measure of an FI’s capital that is equal to the difference between the:

A. book value of its assets and the market value of its liabilities
B. market value of its assets and the book value of its liabilities
C. market value of its assets and the market value of its liabilities
D. book value of its liabilities and the book value of its assets

2.

Which of the following statements is true?

A. The book value of a liability is the reported liability value reported according to its historical costs.
B. The market value concept is also referred to as marking to market.
C. Marking to market allows balance sheet values to reflect current rather than historical prices.
D. All of the listed options are correct.

3.

Which of the following statements is true?

A. The market to book ratio shows the degree of discrepancy between the stock market value of an
FI’s equity and the book value of its equity.
B. The market to book ratio shows the degree of discrepancy between the stock market value of an
FI’s assets and the book value of its assets.
C. The market to book ratio shows the degree of discrepancy between the stock market value of an
FI’s liabilities and the book value of its liabilities.
D. None of the listed options are correct.

4.

Which of the following statements is true?

A. The Basel Accord imposes minimum earnings ratios on banks in major industrialised countries.
B. The Basel Accord imposes maximum asset values on banks in major industrialised countries.
C. The Basel Accord imposes minimum liability values on banks in major industrialised countries.
D. The Basel Accord imposes risk-based capital ratios on banks in major industrialised countries.

5.

Which of the following statements is true?

A. Credit-risk adjusted assets are on-balance-sheet assets only whose values are adjusted for
approximate credit risk.
B. Credit-risk adjusted assets are off-balance-sheet assets only whose values are adjusted for
approximate credit risk.
C. Credit-risk adjusted assets are on- and off-balance-sheet assets whose values are adjusted for
approximate credit risk.
D. Credit-risk adjusted assets are on- and off-balance-sheet assets whose values are adjusted for
approximate credit risk of the FI.

6.

Which of the following statements is true?

A. The Tier 1 capital ratio is the ratio of supplementary capital to the risk-adjusted assets of an FI.
B. The Tier 1 capital ratio is the ratio of core capital to the risk-adjusted assets of an FI.
C. The Tier 1 capital ratio is the ratio of supplementary capital to the assets of an FI.
D. The Tier 1 capital ratio is the ratio of core capital to the assets of an FI.

7.

The term ‘credit equivalent amount’ refers to the:

A. nominal value of an on-balance-sheet item exposed to credit risk
B. credit risk exposure of an on-balance-sheet item
C. credit risk exposure of an off-balance-sheet item
D. nominal value of an off-balance-sheet item exposed to credit risk

8.

Which of the following statements is true?

A. The credit equivalent amount is calculated by multiplying the present value of an off-balance-sheet
instrument by a conversion factor.
B. The credit equivalent amount is calculated by multiplying the present value of an on-balance-sheet
instrument by a conversion factor.
C. The credit equivalent amount is calculated by multiplying the notional amount by a conversion
factor.
D. The credit equivalent amount is calculated by multiplying the face value of an on-balance-sheet
instrument by a conversion factor.

9.

Which of the following statements is true?

A. Potential exposure refers to the cost of replacing a derivative securities contract at today’s prices.
B. Current exposure refers to the cost of replacing a derivative securities contract at today’s prices.
C. Current exposure refers to the cost of replacing a derivative securities contract at the contract’s
maturity.
D. Potential exposure refers to the cost of replacing a derivative securities contract at the contract’s
maturity.

10.

Assume you are presented with the following data regarding an FI’s asset and liability values:

Which of the following statements is true?

A. The net worth of the FI is $2000.

B. The net worth of the FI is –$3000.

C. The net worth of the FI is $3000.

D. The net worth of the FI is –$1000.

11.

Assume an FI has $50 000 in assets and $45 000 in liabilities. Which of the following statements is
true if interest rates on both assets and liabilities increase simultaneously?
A. As the interest rate for both assets and liabilities increase the value of the FI’s net worth will remain
constant.
B. As the interest rate for both assets and liabilities increase the value of the FI’s assets and liabilities
will both decrease.
C. As the interest rate for both assets and liabilities increase the value of the FI’s assets and liabilities
will both increase.
D. As the interest rate for both assets and liabilities increase the value of the FI’s assets and liabilities
will both increase; however, as the FI has more assets than liabilities, the increase in the value of the
FI’s assets will be greater than the increase in the value of its liabilities.

12.

Which of the following elements is usually not included in the book value of capital?

A. the par value of shares

B. the FI’s earnings
C. loan loss reserve
D. the surplus value of shares

13.

Which of the following statements is true?

A. The par value of shares is the current market price of the common stock shares issued by the FI
times the number of shares outstanding.
B. Retained earnings is the accumulated value of past profits not yet paid out in dividends to
shareholders.
C. Loan loss reserve is a special reserve set aside out of retained earnings to meet unexpected losses on
the portfolio.
D. All of the listed options are correct.

14.

Which of the following statements is true?

A. Banks get a tax-shelter against the cost of write-offs.
B. The cost of a write-off is increased by a tax shelter.
C. If losses exceed a bank’s loan loss reserves, the bank is likely to use its liquidity holdings as its next
line of defence.
D. All of the listed options are correct.

15.

Which of the following is the correct way to calculate the historic value of an FI’s equity per share?

A. the sum of the par value of equity divided by the number of shares
B. the market value of ownership shares outstanding divided by the number of shares
C. the sum of the par value of equity, the surplus value, retained earnings and loan reserves divided by
the number of shares
D. the sum of the par value of equity and retained earnings divided by the number of shares

16.

Which of the following are arguments against market value accounting?

A. It introduces a higher degree of stability into an FI’s earnings.

B. It is difficult to implement.
C. FIs would be less willing to accept investments in shorter term assets.
D. There are no arguments against market value accounting.

17.

Which of the following are problems in using the leverage ratio as a measure of capital adequacy?

A. Even with a low leverage ratio, an FI could have a negative market value net worth.
B. The different types of risks, such as credit or interest rate risk are not captured.
C. Off-balance-sheet activities are not captured.
D. Even with a low leverage ratio, an FI could have a negative market value net worth, the different
types of risks, such as credit or interest rate risk are not captured and off-balance-sheet activities are not
captured.

18.

Which of the following statements is true?

A. The first capital adequacy rules were implemented in Australia in 1987.
B. The first capital adequacy rules were implemented in Australia in 1988.
C. The first capital adequacy rules were implemented in Australia in 1989.
D. The first capital adequacy rules were implemented in Australia in 1990.

19.

Which of the following statements is true for Basel II agreement?

A. The Basel capital framework consists of three mutually reinforcing pillars.

B. Pillar I deals with the calculation of regulatory capital against FIs’ credit risk only.
C. Pillar II deals with market discipline.
D. Pillar III deals with the supervisory review process.

20.

Which of the following is true?

A. Total capital is the sum of Tier I and Tier II capital less deductions.
B. Total capital must equal or exceed 8% of risk-weighted assets.
C. The total of Tier II capital is limited to 100% of Tier I capital.
D. All of the listed options are correct.

21.

Consider an FI with the following off-balance-sheet items: A two-year loan commitment with a face
value of $120 million, a standby letter of credit with a face value of $20 million and trade-related
letters of credit with a face value of $70 million. What is the total credit equivalent amount?

A. $63 million
B. $94 million
C. $105 million
D. $310 million

22.

Consider an FI with the following off-balance-sheet items: A two-year loan commitment with a face
value of $120 million, a standby letter of credit with a face value of $20 million and trade-related
letters of credit with a face value of $70 million. All counterparties have a credit rating of BBB.
What is the capital amount the FI needs to hold against these exposures?
A. $5.04 million
B. $7.52 million
C. $8.4 million
D. $24.8 million

23.

Which of the following statements is true in the context of Basel II?

A. The standardised approach is the most basic approach to calculating operational risk capital.
B. FIs can choose whether or not to hold operational risk capital.
C. In the basic indicator approach, operational risk capital is calculated as a fixed percentage of an FI’s
gross income figure, whereby gross income is defined as gross interest income plus gross non-interest
income.
D. None of the listed options are correct.

24.

Which of the following are criticisms of a risk-based capital ratio?

A. The risk-class categories might not adequately reflect riskiness.

B. The 8% risk-based capital requirement has not created a level competitive playing field across
banks.
C. Credit risk portfolio diversification opportunities are largely ignored.
D. All of the listed options are correct.

25.

Choose the correct statement:

A. Basel II provides a better alignment of risks to borrowers than Basel I and remains the basis of the
current measurement of credit-risk-adjusted assets.
B. Basel I provides a better alignment of risks to borrowers than Basel II and remains the basis of the
current measurement of credit-risk-adjusted assets.
C. Basel III provides a better alignment of risks to borrowers than Basel II and remains the basis of the
current measurement of credit-risk-adjusted assets.
D. None of the listed options are correct.

26.

Choose the correct capital adequacy ratio(s):

A. Total capital (Tier 1 capital plus Tier 2 capital) must be at least 6.5% of risk-weighted assets at all
times.
B. Total Tier 1 capital must be at least 9% of risk-weighted assets at all times.
C. Common equity Tier 1 must be at least 7.5% of risk-weighted assets at all times.
D. None of the listed options are correct.

27.

Total capital (Tier 1 capital plus Tier 2 capital) must be at least ______ of risk-weighted assets at all
times:

A. 9%
B. 7.5%
C. 8%
D. 4.5%

28.

Choose the correct statement:

A. APRA’s APS 112 Capital adequacy: standardised approach to credit risk (APS 112) sets out the
methods to be used to calculate credit-risk-adjusted assets using the standardised approach.
B. APRA’s APS 112 Capital adequacy: standardised approach to credit risk (APS 112) sets out the
methods to be used to calculate credit-risk-adjusted assets using the advanced approach.
C. APRA’s APS 112 Capital adequacy: standardised approach to credit risk (APS 112) sets out the
methods to be used to calculate credit-risk-adjusted assets using the combination approach.
D. APRA’s APS 112 Capital adequacy: standardised approach to credit risk (APS 112) sets out the
methods to be used to calculate credit-risk-adjusted assets using the IRB approach.

29.

Credit derivatives were included in the banking book with the introduction of:
A. Basel I
B. Basel II
C. Basel 2.5
D. Basel III

30.

Common equity Tier 1 is:

A. made up discretionary non-cumulative dividends or coupons that have neither a maturity date nor
an incentive to redeem
B. used to provide loss absorption on a going-concern basis and must be subordinated to depositors
and general creditors and an original maturity of at least five years
C. subordinated to all other types of funding, absorbs losses, has full flexibility of dividend payments
and has no maturity date
D. None of the listed options are correct.

31.

Current credit exposure is the:

A. credit risk exposure of an off-balance-sheet item

B. cost of replacing a derivative securities contract at today’s prices
C. risk that a counterparty to a derivative securities contract will default in the future
D. potential loss on current loans

32.

Market risk is made up of:

A. risk of companies on the stock exchange and political risk

B. general market risk and specific risk
C. pure risk and speculative risk
D. inflation risk and interest rate risk

33.

The risk of loss owing to changes in the general level of market prices or interest rates, arising from
positions in interest rate, equities, foreign exchange and commodities is:
A. specific risk
B. general market risk
C. beta
D. total risk

34.

The risk that the value of a security will change due to issuer-specific factors and applies to interest
rate and equity positions related to a specific issuer is:

A. specific risk
B. general market risk
C. beta
D. total risk

35.

Procyclicality refers to features or characteristics that:

A. serve to exacerbate or amplify the underlying cyclicality of economic activity

B. are only apparent during the down cycle of an economy
C. help the economy to recover from a down cycle
D. None of the listed options are correct.

36.

Choose the correct answer:

A. The purpose of Pillar 1 is to encourage market discipline through an information disclosure

framework covering capital, capital adequacy, risk exposures and risk assessment processes.
B. The purpose of Pillar 2 is to encourage market discipline through an information disclosure
framework covering capital, capital adequacy, risk exposures and risk assessment processes.
C. The purpose of Pillar 3 is to encourage market discipline through an information disclosure
framework covering capital, capital adequacy, risk exposures and risk assessment processes.
D. None of the listed options are correct.

37.

Market to book ratio is a ratio that shows the discrepancy between the:
A. stock market value of an FI’s equity and the book value of its equity
B. historic value of an FI’s equity and the book value of its equity
C. US dollar value of an FI’s equity and the book value of its equity
D. value of an FI’s debt and the book value of its debt

38.

Economic capital is:

A. the asset and liability values of an FI reported according to their historical costs
B. the amount of capital that the DI’s shareholders are prepared to contribute so that the business
remains as a going concern
C. a measure of an FI’s capital that is equal to the difference between the market value of its assets and
the market value of its liabilities
D. allows balance sheet values to reflect current rather than historical prices

39.

Book value is:

A. the asset and liability values of an FI reported according to their historical costs
B. the amount of capital that the DI's shareholders are prepared to contribute so that the business
remains as a going concern
C. a measure of an FI’s capital that is equal to the difference between the market value of its assets and
the market value of its liabilities
D. allows balance sheet values to reflect current rather than historical prices

40.

Loan loss reserve is:

A. the accumulated value of past profits not yet paid out in dividends to shareholders
B. the face value of the ordinary shares issued by the FI
C. a special reserve set aside out of retained earnings to meet expected and actual losses on the
portfolio
D. the difference between the price the public paid for common stock or shares when originally offered
and their par values times the number of shares outstanding

41.

Choose the correct statement:

A. For DIs adopting advanced approaches to risk measurement, APRA requires the use of models that
capture ‘economic capital’.
B. For DIs adopting standardised approaches to risk measurement, APRA requires the use of models
that capture ‘economic capital’.
C. For DIs adopting combination approaches to risk measurement, APRA requires the use of models
that capture ‘economic capital’.
D. None of the listed options are correct.

42.

Retained earnings are:

A. the accumulated value of past profits not yet paid out in dividends to shareholders
B. the face value of the ordinary shares issued by the FI
C. a special reserve set aside out of retained earnings to meet expected and actual losses on the
portfolio
D. the difference between the price the public paid for common stock or shares when originally offered
and their par values times the number of shares outstanding

43.

To calculate the operational risk capital charge, the DI’s activities are first divided into:

A. investment banking, commercial banking and ‘all other activity’

B. commercial lending, retail lending and ‘all other activity’
C. derivative trading, foreign exchange trading and ‘all other activity’
D. retail banking, commercial banking and ‘all other activity’

44.

Within the framework of Pillar I, which Basel Accord introduced two capital buffers: a capital
conservation buffer and a countercyclical capital buffer?
A. Basel I
B. Basel II
C. Basel 2.5
D. Basel III

45.

The capital conservation buffer is _______ of risk-weighted assets, comprised of _______ only:

A. 2.5%, common equity Tier 1 only

B. 2.5%, Tier 1 only
C. 7.5%, common equity Tier 1 only
D. 7.5%, Tier 1 only

46.

Choose the correct statement:

A. The countercyclical capital buffer has a microeconomic focus and aims to ensure that financial
system capital requirements are sufficient given the political environment in which DIs operate.
B. The countercyclical capital buffer has a political focus and aims to ensure that financial system
capital requirements are sufficient given the economic environment in which DIs operate.
C. The countercyclical capital buffer has a macroeconomic focus and aims to ensure that financial
system capital requirements are sufficient given the macro-financial environment in which DIs operate.
D. None of the listed options are correct.

47.

Choose the correct statement:

A. Any Pillar 2 adjustment between the DI and APRA is made public to ensure investors are aware of
the DI’s current position.
B. Any Pillar 2 adjustment is confidential between the DI and APRA to avoid any adverse signalling
effects.
C. Any Pillar 2 adjustment is confidential between the DI and APRA, only if the DI does not want to
disclose the adjustment.
D.Any Pillar 2 adjustment between the DI and APRA is withheld for six weeks.

48.

Which pillar of the Basel Accord requires quantitative disclosures for capital structure, capital
adequacy and risk exposure so market participants are able to undertake a meaningful comparison of
DIs and their risk-based performance?

A. Pillar 1
B. Pillar 2
C. Pillar 3
D. all pillars

49.

Which of the following statements is true?

A. Basel II broadened measures for measurement of capital and introduced the concept of two pillars
to protect solvency of individual FIs whereas Basel III introduced liquidity and higher capital levels to
protect the financial system in general.
B. APRA introduced an enhanced Basel II called Basel 2.5 with new provisions that were difficult for
Australian FIs to meet in the short term.
C. Basel II set targets that were commensurate with the risk profile and environment in an endeavour
to protect solvency of individual FIs whereas Basel III introduced liquidity and higher capital levels to
protect the financial system in general.
D. Basel III changes to capital requirements requires higher secondary capital levels to be held by FIs.

50.

The calculation of the risk-adjusted asset values of OBS market contracts:

A. nearly always equals zero because the exchange over which the contract initially traded assumes all
of the risk
B. requires multiplication of the credit equivalent amounts by the appropriate risk weights and includes
all OBS transactions
C. requires the calculation of a conversion factor to create credit equivalent amounts for all OBS
transactions
D. requires multiplication of the credit equivalent amounts by the appropriate risk weights and the
calculation of a conversion factor to create credit equivalent amounts

51.
Pillar 3 of APRA’s supervision framework is to encourage market discipline through an information
disclosure framework. Pillar 3 requires:

A. qualitative disclosures for capital structure, capital adequacy and risk exposure
B. quantitative disclosures for capital structure, capital adequacy and risk exposure
C. comparison of the risk exposure, capital inadequacy and capital structure for FIs
D. quantitative disclosures for risk management processes

52.

The market risk capital charge is included in capital regulations as regulators recognise that changes
in market value can impact on an FI’s insolvency risk.

A. Market risk takes into account general market risk, specific risk and operational risk.
B. FIs with APRA approval can use a combination approach with all risk categories and across all
regions.
C. APRA can increase or decrease capital requirements from the internal model if it considers that it
doesn’t reflect fully the FI’s market risk profile.
D. All of the listed options are correct.

53.

Basel III’s development and implementation has been driven by G20 countries following the global
financial crisis and will include:
A. capital conservation buffers and pro-cyclical buffers
B. increased capital requirements which can be met by holding more primary and secondary capital
C. global liquidity and funding standards and higher quality of capital
D. an increase in the maximum capital requirements

54.

The book value of an asset or liability is the value reported according to the historical cost of the
asset or liability.
TRUE

55.

Counterparty credit risk is the risk that the other side of a contract will default on payment
obligation.
TRUE

56.

The leverage ratio is calculated as assets divided by core capital.

FALSE

57.

Under Basel II, all standard residential mortgages attract a risk weight of 35%.
FALSE

58.

In the standardised approach to operational risk capital, FIs are required to map their overall gross
income into eight business lines that are predetermined by the bank regulator.
TRUE

59.

The regulation required under Basel II is more costly than that required under Basel III, due to the
higher liquid assets requirements and the higher levels of primary capital.
FALSE

60.

Basel III has introduced the first set of global liquidity regulations.
TRUE

61.

Basel III introduced significant capital reforms including measures to raise the quality and minimum
required levels of capital and establish a back-up leverage ratio.
TRUE

62.

Tier 1 capital is used to provide loss absorption on a gone-concern basis and must be subordinated to
depositors and general creditors and an original maturity of at least five years.
FALSE

63.

Common equity Tier I capital ratio is the ratio of common equity Tier 1 capital to the risk-adjusted
assets of a DI.
TRUE

64.

Tier I capital ratio is the ratio of total Tier 1 capital to the risk-adjusted assets of a DI.
TRUE

65.

Total capital ratio is the ratio of the total regulatory capital to the risk-adjusted assets of a DI.
TRUE

66.

Credit-risk-adjusted assets are on- and off-balance-sheet assets whose values are adjusted for
approximate credit risk.
TRUE

67.

Credit-risk-adjusted assets are on- and off-balance-sheet assets whose values are adjusted for the
credit rating of the FI.
FALSE

68.

In determining the risk-adjusted value of the on-balance-sheet credit equivalent amounts of the
contingent guaranty contracts, the risk weights are determined by the credit rating of the underlying
counterparty of the off-balance-sheet activity.
TRUE

69.

Netting is the process under a netting agreement of combining all relevant outstanding transactions
between two counterparties and reducing them to a single net sum for a party to either pay or receive.
TRUE

70.

Current credit exposure is the cost of replacing a derivative securities contract at today’s prices.
TRUE

71.

Current credit exposure is the risk that a counterparty to a derivative securities contract will default in
the future.
FALSE

72.

Basel II established minimum capital requirements, procedures to ensure that sound internal process
are used to assess capital adequacy and set targets that were commensurate with the risk profile and
environment in an endeavour to protect solvency of individual FIs. Basel III introduced liquidity and
higher capital levels to protect the financial system in general.
TRUE

73. What are the major differences between the Basel I and the Basel II approaches to capital
regulation?

Basel I required compliance with two capital ratios: a minimum ratio of 4% for Tier 1 capital (made up
principally of common equity less goodwill) to risk-weighted assets (RWA) and a total capital ratio of
8%. Total capital was made up of both Tier 1 capital and Tier 2 capital (comprised of certain
subordinated debt and similar items).
The two distinct features of the Basel I requirements were the:
1. measurement of capital
2. use of 'risk-weighted assets'.
The consistent definition of capital which led to a common standard of capital measurement across the
globe was a welcome inclusion. The concept of risk-weighted assets was an innovative attempt by
regulators to incorporate the riskiness of a bank's activities into the calculation of capital adequacy.
Under Basel I the credit risk of both on-balance-sheet assets and off-balance-sheet activities was
incorporated into the estimate of a bank's risk-based assets. Criticism of this approach (i.e. reliance on
credit risk only) caused the BIS to upgrade capital requirements to include market risk into the
calculation of risk-weighted assets. APRA introduced this change for Australian banks from January
1998.
The structure of Basel II was very different to the original and consisted of three mutually reinforcing
pillars, which together are designed to contribute to the safety and soundness of the financial system:
Pillar 1: Capital adequacy requirements
Pillar 2: Supervisory review
Pillar 3: Disclosure
The three pillars continue to provide the framework for capital regulation. While the measurement of
capital did not change markedly in Basel II, the measurement of risk was significantly enhanced to
include operational risk, some market risks in the banking book and risks associated with securitisation.
Through Pillar 2, the BIS and APRA stress the importance of the regulatory review process as a critical
complement to minimum capital requirements and assurance that DIs have:
1. sound internal processes in place to assess the adequacy of its capital and
2. capital target-setting processes that are commensurate with the DI's specific risk profile and control
environment.
In Pillar 3, APRA details the disclosure of capital structure, risk exposures and capital adequacy,
allowing market participants to assess critical information describing the risk profile and capital
adequacy of banks. Basel II was a response to risk and sought to establish an international approach to
regulating the quality and level of capital that DIs should carry to protect them from their operational as
well as financial risks.

74.

Identify the main functions of an FI’s capital and differentiate between Tier 1 and Tier 2 capital.
FI's capital provides five main functions:
1. To absorb unanticipated losses with enough margin to inspire confidence and enable the FI to
continue as a going concern.
2. To protect uninsured depositors, bondholders and creditors in the event of insolvency and
liquidation.
3. To protect FI deposit insurance funds, deposit guarantee schemes and the taxpayers.
4. To protect the FI owners against increases in insurance premiums.
5. To fund the real investments necessary to provide financial services.
6. Tier 1 (going concern) capital is comprised of:
(a) common equity Tier 1:
Common equity is the highest quality component of capital. It is subordinated to all other types of
funding, absorbs losses, has full flexibility of dividend payments and has no maturity date.
(b) additional Tier 1 capital:
The concept underlying additional Tier 1 capital is that non-common equity elements included in Tier
1 capital must be able to absorb losses while the DI remains a going concern. APRA requires that
additional Tier 1 items are loss absorbent on a going-concern basis, subordinated, have fully
discretionary non-cumulative dividends or coupons, and have neither a maturity date nor an incentive
to redeem.
Tier 2 (gone concern) capital is used to provide loss absorption on a gone-concern basis and must be
subordinated to depositors and general creditors and an original maturity of at least five years. For
liabilities with a remaining maturity of less than five years, recognition in regulatory capital will be
amortised on a straight-line basis over the final five years to maturity.

75.

Why is a regulatory capital charge against operational risk necessary?

Basel II introduced a regulatory capital charge for operational risk. Prior to this proposal, the BIS had
argued that the operational risk exposures of DIs were adequately taken care of by the 8% credit risk–
adjusted ratio. But increased visibility of operational risks, including examples of fraud and technology
failure, in recent years has induced regulators to propose a separate capital requirement for credit and
operational risks. The BIS now believes that operational risks are sufficiently important for DIs to
devote resources to quantify such risks and to incorporate them separately into their assessment of their
overall capital adequacy.

76.

What are the three limits and minimums of the two tiers of capital?

The two tiers of capital are subject to the three limits and minimums which in summary are:
1 Common equity Tier 1 must be at least 4.5% of risk-weighted assets at all times; that is:

2 Total Tier 1 capital must be at least 6% of risk-weighted assets at all times; that is:

3 Total capital (Tier 1 capital plus Tier 2 capital) must be at least 8% of risk-weighted assets at all
times; that is: