Basel III

    graph TD;
	    A[Common Equity Tier 1 Capital] -->|Calculation:| B(CET1 Ratio);
	    B --> C[Risk-Weighted Assets];
	    C --> D(CET1 Ratio = CET1 Capital / Risk-Weighted Assets);

## What is the minimum Common Equity Tier 1 (CET1) capital required under Basel III? - [ ] 8% - [x] 10.5% - [ ] 3% - [ ] 5% > **Explanation:** The CET1 capital requirement under Basel III starts at 10.5%, significantly higher than the 8% requirement within Basel II. ## What does the Liquidity Coverage Ratio (LCR) signify in Basel III? - [x] The ratio of liquid assets to net cash outflows in a stress period - [ ] The total amount of loans issued by banks - [ ] A method for banks to calculate their credit ratings - [ ] The ratio of capital to outstanding loans > **Explanation:** The liquidity coverage ratio requires banks to hold enough liquid assets to cover short-term cash outflows during times of stress—think of it as a rainy-day fund for banks! ☔️ ## What did Basel III aim to improve upon from Basel II regulations? - [x] Capital and liquidity standards - [ ] Loan processing fees - [ ] Electronic banking policies - [ ] Credit card interest rates > **Explanation:** Basel III primarily sought to strengthen capital and liquidity standards following the lessons learned from the financial crisis, rather than diving into fees or interest rates. ## In what year did the Basel III reforms begin to be enforced? - [ ] 2010 - [x] 2013 - [ ] 2015 - [ ] 2020 > **Explanation:** Basel III reforms were introduced centrally in 2013 and aimed to phase in various requirements over several years afterward. ## Who is primarily responsible for implementing Basel III regulations in the U.S.? - [ ] The Department of Education - [ ] The Securities and Exchange Commission - [x] Federal Reserve - [ ] The National Park Service > **Explanation:** The Federal Reserve, along with other regulatory bodies, is responsible for ensuring that Basel III regulations are implemented properly within U.S. banks, not rangers at the National Park! 🌲🎣 ## How are Large Financial Institutions (like G-SIBs) affected by Basel III? - [x] Tighter regulations on capital reserves and stress testing - [ ] Increased bond holdings for risk coverage - [ ] More lenient lending standards - [ ] Fewer required financial disclosures > **Explanation:** Large banks face more stringent capital requirements and stress testing processes to ensure stability, not exactly a free ride to lend more indiscriminately! ## Why did Senator Elizabeth Warren criticize the Federal Reserve during the Congressional hearing? - [x] For allegedly softening the public's rules for banks following lobbying - [ ] For not increasing interest rates high enough - [ ] For secret dealings with international banks - [ ] For ignoring new technologies in finance > **Explanation:** Senator Warren pointed out that the Federal Reserve began backtracking on its promises to toughen regulations, which gave banks a reason to be unhappy, leading to accusations of weakness! ## What major world event precipitated the creation of Basel III? - [x] The 2007-2009 financial crisis - [ ] The aftermath of the dot-com bubble - [ ] The housing market boom-bust cycle - [ ] The rise of cryptocurrency exchange > **Explanation:** Basel III was developed in response to the failures experienced during the 2007-2009 financial crisis, hence seeking to keep those spectacularly risky investments under better wraps! ## According to Basel III, what is the minimum leverage ratio for banks? - [x] 3% - [ ] 8% - [ ] 10% - [ ] 5% > **Explanation:** Basel III sets a minimum leverage ratio of 3% to enhance banks' stability, much like a security blanket of buffers can help soothe a restless sleeper! ## The commentary period for the rules on Basel III concluded when? - [ ] Next week - [x] Early 2024 - [ ] Mid-2023 - [ ] Late 2025 > **Explanation:** The commentary period for proposed Basel III rules wrapped up in early 2024, paving the way for further discussion—and even more heated debates! 🔥