The capital requirement

The capital requirement is a bank 1) ________, which sets a framework on how banks and depository institutions must handle their capital. The categorization of 2) _______ and capital is highly standardized so that it can be 3) ________ (see Risk-weighted asset). Internationally, the Basel Committee on Banking Supervision housed at the Bank for International Settlements influence each country's banking 4) _______. In 1988, the Committee decided to introduce a capital measurement system commonly 5) _______ the Basel Accord. This framework has been replaced by a significantly more complex capital adequacy framework commonly known as 6) ______. After 2012 it will be replaced by Basel III.

While Basel II significantly alters the calculation of the 7) ________, it leaves alone the calculation of the capital. The 8) _______ is the percentage of a bank's capital to its risk-weighted assets. Weights are defined by 9) ________ whose calculation is dictated under the relevant Accord.

Each national regulator normally has a very slightly different way of calculating 10) ________, designed 11) _______ the common requirements within their individual national legal framework.

Most developed countries implement Basel I and II, stipulate lending limits as a multiple of a banks capital eroded by the yearly 12) _________.

(inflation rate, capital ratio, regulation, bank capital, to meet, assets, referred to as, risk weighted, Basel II, capital requirements, risk weights, risk-sensitivity ratios)

Exercise V. Render in English: