{"id":22328,"date":"2023-04-24T09:56:33","date_gmt":"2023-04-24T04:26:33","guid":{"rendered":"https:\/\/gstguntur.com\/?p=22328"},"modified":"2023-04-24T09:56:33","modified_gmt":"2023-04-24T04:26:33","slug":"cs-professional-banking-law-and-practice-glossary-of-important-terms","status":"publish","type":"post","link":"https:\/\/gstguntur.com\/cs-professional-banking-law-and-practice-glossary-of-important-terms\/","title":{"rendered":"CS Professional Banking Law and Practice Glossary of Important Terms"},"content":{"rendered":"

CS Professional Banking Law and Practice Glossary of Important Terms – CS Professional Banking Law and Practice Notes<\/a>\u00a0is designed strictly as per the latest syllabus and exam pattern.<\/p>\n

CS Professional Banking Law and Practice Glossary of Important Terms<\/h2>\n

Capital<\/strong><\/p>\n

Capital Funds :
\nEquity contribution of owners. The basic approach of capital adequacy framework is that a bank should have sufficient capital to provide a stable resource to absorb any losses arising from the risks in its business. Capital is divided into different tiers according to the characteristics \/ qualities of each qualifying instrument. For supervisory purposes capital is split into two categories: Tier I and Tier II.<\/p>\n

Tier I Capital :
\nA term used to refer to one of the components of regulatory capital. It consists mainly of share capital and disclosed reserves (minus goodwill, if any). Tier I items are deemed to be of the highest quality because they are fully available to cover losses. Hence it is also termed as core capital.<\/p>\n

Tier II Capital :
\nRefers to one of the components of regulatory capital. Also known as supplementary capital, it consists of certain reserves and certain types of subordinated debt. Tier II items qualify as regulatory capital to the extent that they can be used to absorb losses arising from a bank’s activities. Tier II’s capital loss absorption capacity is lower than that of Tier I capital.<\/p>\n

Revaluation
\nreserves Revaluation reserves are a part of Tier-ll capital. These reserves arise from revaluation of assets that are undervalued on the bank’s books, typically bank premises and marketable securities. The extent to which the revaluation reserves can be relied upon as a cushion for unexpected losses depends mainly upon the level of certainty that can be placed on estimates of the market values of the relevant assets and the subsequent deterioration in values under difficult market conditions or in a forced sale.<\/p>\n

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Leverage :
\nRatio of assets to capital.<\/p>\n

Capital reserves :
\nThat portion of a company’s profits not paid out as dividends to shareholders. They are also known as undistributable reserves and are ploughed back into the business.<\/p>\n

Deferred Tax Assets :
\nUnabsorbed depreciation and carry forward of losses which can be set-off against future taxable income which is considered as timing differences result in deferred tax assets. The Deferred Tax Assets are accounted as per the Accounting Standard 22.<\/p>\n

Deferred Tax Liabilities :
\nDeferred Tax Liabilities have an effect of increasing future year’s income tax payments, which indicates that they are accrued income taxes and meet definition of liabilities.<\/p>\n

Subordinated debt :
\nRefers to the status of the debt. In the event of the bankruptcy or liquidation of the debtor, subordinated debt only has a secondary claim on repayments, after other debt has been repaid.<\/p>\n

Hybrid debt capital instruments :
\nIn this category, fall a number of capital instruments, which combine certain characteristics of equity and certain characteristics of debt. Each has a particular feature, which can be considered to affect its quality as capital. Where these instruments have close similarities to equity, in particular when they are able to support losses on an ongoing basis without triggering liquidation, they may be included in Tier II capital.<\/p>\n

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BASEL Committee on Banking Supervision :
\nThe BASEL Committee is a committee of bank supervisors consisting of members from each of the G10 countries. The Committee is a forum for discussion on the handling of specific supervisory problems. It coordinates the sharing of supervisory responsibilities among national authorities in respect of banks\u2019 foreign establishments with the aim of ensuring effective supervision of banks\u2019 activities worldwide.<\/p>\n

BASEL Capital accord :
\nThe BASEL Capital Accord is an Agreement concluded among country representatives in 1988 to develop standardised risk-based capital requirements for banks across countries. The Accord was replaced with a new capital adequacy framework (BASEL II), published in June 2004. BASEL II is based on three mutually reinforcing pillars hat allow banks and supervisors to evaluate properly the various risks that banks face. These three pillars are:<\/p>\n