Reading Comprehension
Reading Comprehension: English Reading Comprehension Exercises with Answers, Sample Passages for Reading Comprehension Test for GRE, CAT, IELTS preparation
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English Reading Comprehension Test Questions and Answers. Improve your ability to read and comprehend English Passages
Q291. > The structure and operations of banks have undergone a rapid
> transformation in recent years. Consequent upon the revolution in
> information technology and the associated increase in competition
> financial intermediaries have become increasingly global in
> geographical coverage and universal in the financial operations,
> encompassing a wide range of activities including banking, securities
> markets activities and insurance. In the face of widespread concerns
> about declining profitability of banks, the Basel capital adequacy
> norms were enacted.
>
> Although the Basel norms helped to arrest the erosion of banks,
> capital ratios, concerns were raised regarding the mere applicability
> of baseline capital ratios in the changed environment of operation.
> The blurring of both functional as well as national divisions among
> the financial intermediaries, and the speed and complexity of
> adjustment, made it difficult for regulators to keep up with the
> growing pace change. In particular, the rule of ‘one-size-fits-all’
> aspect of the capital adequacy ratio was the subject of intense
> debate. Recent banking crisis only emphasized the point that baseline
> capital adequacy norms were not adequate to hedge against failures. In
> response to the same, the Basel Committee on Banks’ Supervision came
> out with the new Consultative Paper on Capital Adequacy. It invited
> suggestions from the policymakers, academia and other institutes all
> over the world. After taking into consideration manifold suggestions
> of the various organizations, the second Consultative Paper on Capital
> Adequacy was released. The Accord rests on three pillars; the first
> pillar of minimum capital requirement, the second pillar of
> supervisory review process and the third pillar of market discipline.
> The first pillar sets out the minimum capital requirements. The new
> framework maintains both the current definition of capital and the
> minimum requirement of 8% of capital to risk-weighted assets. The
> revised Accord will be extended on a consolidation basis to holding
> companies of banking groups. The Accord stresses upon the improvement
> in measurement of risks. The credit risk measurement methods have been
> made more elaborate than those in the existing Accord. The new
> framework also emphasizes the measurement of operational risk. For
> measuring credit risk, two options have been proposed. The first is
> the standardized approach and the second is the internal rating based
> approach. Under the standardized approach, the existing approach for
> credit risk remains conceptually the same, but the risk-weights have
> been enlarged to encompass exposures to a broad category of borrowers
> with reference to the rating provided by rating agencies.
Which of the following factors are responsible for rapid transformation in banks in recent years?
- The forces of privatization and international players have compelled the banks to do so.
- Control from regulators has become meaningless for the banks to survive.
- Sudden upsurge in economy.
- The competition has increased and information technology has undergone a sea change.
- None of these
Solution : Control from regulators has become meaningless for the banks to survive.
Q292. > The structure and operations of banks have undergone a rapid
> transformation in recent years. Consequent upon the revolution in
> information technology and the associated increase in competition
> financial intermediaries have become increasingly global in
> geographical coverage and universal in the financial operations,
> encompassing a wide range of activities including banking, securities
> markets activities and insurance. In the face of widespread concerns
> about declining profitability of banks, the Basel capital adequacy
> norms were enacted.
>
> Although the Basel norms helped to arrest the erosion of banks,
> capital ratios, concerns were raised regarding the mere applicability
> of baseline capital ratios in the changed environment of operation.
> The blurring of both functional as well as national divisions among
> the financial intermediaries, and the speed and complexity of
> adjustment, made it difficult for regulators to keep up with the
> growing pace change. In particular, the rule of ‘one-size-fits-all’
> aspect of the capital adequacy ratio was the subject of intense
> debate. Recent banking crisis only emphasized the point that baseline
> capital adequacy norms were not adequate to hedge against failures. In
> response to the same, the Basel Committee on Banks’ Supervision came
> out with the new Consultative Paper on Capital Adequacy. It invited
> suggestions from the policymakers, academia and other institutes all
> over the world. After taking into consideration manifold suggestions
> of the various organizations, the second Consultative Paper on Capital
> Adequacy was released. The Accord rests on three pillars; the first
> pillar of minimum capital requirement, the second pillar of
> supervisory review process and the third pillar of market discipline.
> The first pillar sets out the minimum capital requirements. The new
> framework maintains both the current definition of capital and the
> minimum requirement of 8% of capital to risk-weighted assets. The
> revised Accord will be extended on a consolidation basis to holding
> companies of banking groups. The Accord stresses upon the improvement
> in measurement of risks. The credit risk measurement methods have been
> made more elaborate than those in the existing Accord. The new
> framework also emphasizes the measurement of operational risk. For
> measuring credit risk, two options have been proposed. The first is
> the standardized approach and the second is the internal rating based
> approach. Under the standardized approach, the existing approach for
> credit risk remains conceptually the same, but the risk-weights have
> been enlarged to encompass exposures to a broad category of borrowers
> with reference to the rating provided by rating agencies.
According to the passage activities encompassed by banks are:
- insurance, housing finance and low cost funds.
- market discipline, profit maximization and priority sector banking.
- securities markets, insurance and banking.
- geographical coverage, universalization and transformation.
- None of these
Solution : securities markets, insurance and banking.
Q293. > The structure and operations of banks have undergone a rapid
> transformation in recent years. Consequent upon the revolution in
> information technology and the associated increase in competition
> financial intermediaries have become increasingly global in
> geographical coverage and universal in the financial operations,
> encompassing a wide range of activities including banking, securities
> markets activities and insurance. In the face of widespread concerns
> about declining profitability of banks, the Basel capital adequacy
> norms were enacted.
>
> Although the Basel norms helped to arrest the erosion of banks,
> capital ratios, concerns were raised regarding the mere applicability
> of baseline capital ratios in the changed environment of operation.
> The blurring of both functional as well as national divisions among
> the financial intermediaries, and the speed and complexity of
> adjustment, made it difficult for regulators to keep up with the
> growing pace change. In particular, the rule of ‘one-size-fits-all’
> aspect of the capital adequacy ratio was the subject of intense
> debate. Recent banking crisis only emphasized the point that baseline
> capital adequacy norms were not adequate to hedge against failures. In
> response to the same, the Basel Committee on Banks’ Supervision came
> out with the new Consultative Paper on Capital Adequacy. It invited
> suggestions from the policymakers, academia and other institutes all
> over the world. After taking into consideration manifold suggestions
> of the various organizations, the second Consultative Paper on Capital
> Adequacy was released. The Accord rests on three pillars; the first
> pillar of minimum capital requirement, the second pillar of
> supervisory review process and the third pillar of market discipline.
> The first pillar sets out the minimum capital requirements. The new
> framework maintains both the current definition of capital and the
> minimum requirement of 8% of capital to risk-weighted assets. The
> revised Accord will be extended on a consolidation basis to holding
> companies of banking groups. The Accord stresses upon the improvement
> in measurement of risks. The credit risk measurement methods have been
> made more elaborate than those in the existing Accord. The new
> framework also emphasizes the measurement of operational risk. For
> measuring credit risk, two options have been proposed. The first is
> the standardized approach and the second is the internal rating based
> approach. Under the standardized approach, the existing approach for
> credit risk remains conceptually the same, but the risk-weights have
> been enlarged to encompass exposures to a broad category of borrowers
> with reference to the rating provided by rating agencies.
The main features of the standardized approach are:
- the credit risk management should encompass large corporate borrowers.
- the borrowers should not have more than 8% risk weighted assets.
- banks capital reserve ratios should be strictly maintained.
- the risk weights should take into consideration the rating of rating agencies.
- None of these
Solution : the credit risk management should encompass large corporate borrowers.
Q294. > The structure and operations of banks have undergone a rapid
> transformation in recent years. Consequent upon the revolution in
> information technology and the associated increase in competition
> financial intermediaries have become increasingly global in
> geographical coverage and universal in the financial operations,
> encompassing a wide range of activities including banking, securities
> markets activities and insurance. In the face of widespread concerns
> about declining profitability of banks, the Basel capital adequacy
> norms were enacted.
>
> Although the Basel norms helped to arrest the erosion of banks,
> capital ratios, concerns were raised regarding the mere applicability
> of baseline capital ratios in the changed environment of operation.
> The blurring of both functional as well as national divisions among
> the financial intermediaries, and the speed and complexity of
> adjustment, made it difficult for regulators to keep up with the
> growing pace change. In particular, the rule of ‘one-size-fits-all’
> aspect of the capital adequacy ratio was the subject of intense
> debate. Recent banking crisis only emphasized the point that baseline
> capital adequacy norms were not adequate to hedge against failures. In
> response to the same, the Basel Committee on Banks’ Supervision came
> out with the new Consultative Paper on Capital Adequacy. It invited
> suggestions from the policymakers, academia and other institutes all
> over the world. After taking into consideration manifold suggestions
> of the various organizations, the second Consultative Paper on Capital
> Adequacy was released. The Accord rests on three pillars; the first
> pillar of minimum capital requirement, the second pillar of
> supervisory review process and the third pillar of market discipline.
> The first pillar sets out the minimum capital requirements. The new
> framework maintains both the current definition of capital and the
> minimum requirement of 8% of capital to risk-weighted assets. The
> revised Accord will be extended on a consolidation basis to holding
> companies of banking groups. The Accord stresses upon the improvement
> in measurement of risks. The credit risk measurement methods have been
> made more elaborate than those in the existing Accord. The new
> framework also emphasizes the measurement of operational risk. For
> measuring credit risk, two options have been proposed. The first is
> the standardized approach and the second is the internal rating based
> approach. Under the standardized approach, the existing approach for
> credit risk remains conceptually the same, but the risk-weights have
> been enlarged to encompass exposures to a broad category of borrowers
> with reference to the rating provided by rating agencies.
The consultative paper of Basel Committee was a result of:
- three pillar accord of academic institutes.
- contribution from international policy makers, academicians and institutions.
- failure of structures and operations of banks in the world.
- erosion of banks’ fixed assets owing to global competition.
- None of these
Solution : failure of structures and operations of banks in the world.
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Q295. > The structure and operations of banks have undergone a rapid
> transformation in recent years. Consequent upon the revolution in
> information technology and the associated increase in competition
> financial intermediaries have become increasingly global in
> geographical coverage and universal in the financial operations,
> encompassing a wide range of activities including banking, securities
> markets activities and insurance. In the face of widespread concerns
> about declining profitability of banks, the Basel capital adequacy
> norms were enacted.
>
> Although the Basel norms helped to arrest the erosion of banks,
> capital ratios, concerns were raised regarding the mere applicability
> of baseline capital ratios in the changed environment of operation.
> The blurring of both functional as well as national divisions among
> the financial intermediaries, and the speed and complexity of
> adjustment, made it difficult for regulators to keep up with the
> growing pace change. In particular, the rule of ‘one-size-fits-all’
> aspect of the capital adequacy ratio was the subject of intense
> debate. Recent banking crisis only emphasized the point that baseline
> capital adequacy norms were not adequate to hedge against failures. In
> response to the same, the Basel Committee on Banks’ Supervision came
> out with the new Consultative Paper on Capital Adequacy. It invited
> suggestions from the policymakers, academia and other institutes all
> over the world. After taking into consideration manifold suggestions
> of the various organizations, the second Consultative Paper on Capital
> Adequacy was released. The Accord rests on three pillars; the first
> pillar of minimum capital requirement, the second pillar of
> supervisory review process and the third pillar of market discipline.
> The first pillar sets out the minimum capital requirements. The new
> framework maintains both the current definition of capital and the
> minimum requirement of 8% of capital to risk-weighted assets. The
> revised Accord will be extended on a consolidation basis to holding
> companies of banking groups. The Accord stresses upon the improvement
> in measurement of risks. The credit risk measurement methods have been
> made more elaborate than those in the existing Accord. The new
> framework also emphasizes the measurement of operational risk. For
> measuring credit risk, two options have been proposed. The first is
> the standardized approach and the second is the internal rating based
> approach. Under the standardized approach, the existing approach for
> credit risk remains conceptually the same, but the risk-weights have
> been enlarged to encompass exposures to a broad category of borrowers
> with reference to the rating provided by rating agencies.
How did Basel norms help the Bank?
- It changed the environment of operations.
- The decline in capital ratios was arrested.
- The banks could successfully keep market discipline.
- It did not erode the quality of risk measurement.
- None of these
Solution : The banks could successfully keep market discipline.
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Solution :
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