FDIC Technical Examination Questions and Answers Fully Solved 100%

What items should be fully deducted from Tier 1 Capital? - ️️- Goodwill - Deferred tax assets that arise from net operating loss and tax credit carry-forwards - Other intangible assets (except for mortgage servicing assets) - Gains on sale of securitization exposures - Certain investments in another financial institution's capital instruments - Unrealized gains or losses on certain cash flow hedges What is the formula for calculating CET1 Capital? - ️️Common Stock + Surplus Net of Treasury Stock + Retained Earnings + AOCI + (Regulatory Deductions/ Adjustments) + CET1 Non Controlling Minority Interest What are the four purposes of Part 324 of the FDIC rules and regulations? - ️️- Defines capital elements - Establishes risk-weighting guidelines for determining capital requirements under the standardized and advanced approaches -Sets PCA standards that prescribe supervisory action for institutions that are not adequately capitalized -Establishes requirements to maintain a capital conservation buffer that affects capital distributions and discretionary payments What are Basel III Capital Standards designed to do? - ️️To strengthen the quality and quantity of bank capital and promote a stronger financial industry that is more resilient to economic stress Who do Basel III standards apply to? - ️️All FDIC insured depository institutions What is emphasized by Basel III standards as the predominant form of bank capital? - ️️Common Equity Tier 1 Capital What is the most loss absorbing form of capital? - ️️Common Equity Tier 1 Capital Why is Common Equity Tier 1 Capital widely recognized as the most loss-absorbing form of capital? - ️️It is permanent and places shareholders' funds at risk of loss in the event of insolvency Where can you find the capital rules for all FDIC supervised institutions? - ️️Part 324 of of the FDIC rules and regulations What are the four purposes of Capital? - ️️1. Absorb Losses 2. Promote Public Confidence3. Restrict Excessive Asset Growth 4. Protect Depositors and the Deposit Insurance Fund What are the components of regulatory capital? - ️️- Common equity tier 1 capital - Additional tier 1 capital - Tier 2 capital What comprises Tier 1 Capital? - ️️Common equity tier 1 capital Additional tier 1 capital What comprises total capital? - ️️Tier 1 Capital (CET1 and Aditional Tier 1 Capital) Tier 2 Capital What serves as the numerators for calculating regulatory capital ratios? - ️️- Common equity tier 1 capital - Tier 1 capital - Total capital What serves as the denomonator for calculating regulatory capital ratios? - ️️Risk weighted assets What serves as the numerator for calculating the Tier 1 Leverage Capital Ratio? - ️️Average total assets