Which of the following statements about leverage ratios under Basel III is correct?
A.
The leverage ratio is the ratio of the bank’s Tier 1 Capital to total assets of the bank, excluding its off- balance sheet exposures and derivatives.
B.
The purpose of introducing a leverage ratio is to avoid the build-up of excess leverage that could potentially lead to a “credit crunch” in stressed conditions.
C.
The leverage ratio under Basel III must be higher than 4%.
D.
The leverage ratio is the ratio of the bank’s Tier 1 and Tier 2 Capital to total assets of the bank, including its off-balance sheet exposures and derivatives.
The Answer Is:
B
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