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
Q296. > 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.
Emphasis on operational risk measurement was the main feature of:
- theory of three pillars risk management.
- first consultative paper on capital adequacy.
- second consultative paper on capital adequacy.
- Basel capital adequacy norms.
- None of these
Solution : theory of three pillars risk management.
Q297. > 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 difficulties was faced by regulators on prescription of Basel norms?
- The regulators could not keep up with growing pace of change.
- There was no provision for risk measurement.
- The minimum requirement of 8% of capital could not be met.
- The supervisory review process could not be carried out.
- None of these
Solution : The regulators could not keep up with growing pace of change.
Q298. > 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 is NOT a recommendation of second consultative paper on capital adequacy?
- The minimum capital requirement for a bank has been prescribed.
- Universal financial operations are permitted within limited geographical coverage.
- The supervisory review should be more comprehensive.
- The market discipline has to be observed by each bank.
- None of these
Solution : Universal financial operations are permitted within limited geographical coverage.
Q299. > 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 passage factor(s) responsible for declining profitability in banks was/were:
(A) cut-throat competition and technology revolution.
(B) globalization of financial intermediaries.
(C) privatization of insurance.
- Only (A)
- Only (B)
- Both (A) and (B)
- Both (B) and (C)
- Neither (A) nor (B)
Solution : Both (A) and (B)
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Q300. > Ecoefficiency (measures to minimize environmental impact through the
> reduction or elimination of waste from production processes) has
> become a goal for companies worldwide, with many realizing significant
> cost savings from such innovations. Peter Senge and Goran Carstedt see
> this development as laudable but suggest that simply adopting
> ecoefficiency innovations could actually worsen environmental stresses
> in the future. Such innovations reduce production waste but do not
> alter the number of products manufactured nor the waste generated from
> their use and growth. Moreover, there is no guarantee that increased
> economic growth from ecoefficiency will come in similarly ecoefficient
> ways, since in today’s global markets, greater profits may be turned
> into investment capital that could easily be reinvested in old-style
> eco-inefficient industries. Even a vastly more ecoefficient industrial
> system could, were it to grow much larger, generate more total waste
> and destroy more habitat and species than would a smaller, less
> ecoefficient economy. Senge and Carstedt argue that to preserve the
> global environment and sustain economic growth, businesses must
> develop a new systemic approach that reduces total material use and
> total accumulated waste. Focusing exclusively on ecoefficiency, which
> offers a compelling business case according to established thinking,
> may distract companies from pursuing radically different products and
> business models.
The primary purpose of the passage is to
- explain why a particular business strategy has been less successful than was once anticipated
- propose an alternative to a particular business strategy that has inadvertently caused ecological damage
- present a concern about the possible consequences of pursuing a particular business strategy
- make a case for applying a particular business strategy on a large scale than is currently practiced
- suggest several possible outcomes of companies’ failure to understand the economic impact of a particular business strategy
Solution : present a concern about the possible consequences of pursuing a particular business strategy
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