- CFA Exams
- CFA Level I Exam
- Topic 3. Financial Statement Analysis
- Learning Module 13. Analysis of Financial Institutions
- Subject 2. Analyzing a Bank: The CAMELS approach
CFA Practice Question
A bank is considered to be very safe if it has a large amount of:
II. Tier-1 capital
III. Tier-2 capital
I. risk-weighted assets
II. Tier-1 capital
III. Tier-2 capital
Correct Answer: None of them is correct.
It is the ratio that matters. The minimum capital adequacy ratios are critical is to make sure that banks have enough cushion to absorb a reasonable amount of losses before they become insolvent and consequently lose depositors’ funds.
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