Distinguish between regulatory capital and balance sheet

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Question 1:

a. Distinguish between regulatory capital and balance sheet capital and illustrate how each of them is measured.

b. Identify whether the Basel Accord is based on regulatory capital or balance sheet capital and illustrate how this has changed over time.

c. Explain the difference between Common Equity Tier 1, Additional Capital Tier 1 and Tier 2 regulatory capital. Which type of regulatory capital do regulators prefer and why?

Question 2:

a. Provides two graphs for (1) tier 1 regulatory capital ratio and (2) total regulatory capital ratio during the 2007-2015 period using Bankscope data accessed via the library's website. Please include the four (4) major Australian banks and two (2) UK banks which are HSBC Bank and Barclays Bank.

b. Interpret the capital risk of these banks. Which bank holds the lowest level of regulatory capital against their total assets? Why is that the case?

Question 3:

In the 2015 Commonwealth Bank Annual report, a comparative graph of CET1 ratios is provided on page 25. Explain how the Commonwealth Bank went in relation to the other banks that you graphed in question 2a.

https://www.commbank.com.au/about-us/shareholders/financial-information/annual-reports.html

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Reference no: EM131030805

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