Single choice1)The supplementary leverage ratio (SLR) is:The ratio of tier 1 capital to tier 2 capitalThe ratio of tier 1 capital to risk-weighted assets (RWAs)The ratio of tier 1 capital to its total leverage exposure
Question
Single choice1)The supplementary leverage ratio (SLR) is:The ratio of tier 1 capital to tier 2 capitalThe ratio of tier 1 capital to risk-weighted assets (RWAs)The ratio of tier 1 capital to its total leverage exposure
Solution
The correct answer is: The ratio of tier 1 capital to its total leverage exposure.
The Supplementary Leverage Ratio (SLR) is a measure that determines the capital adequacy of a bank. It is calculated by dividing Tier 1 capital by the bank's total leverage exposure. Tier 1 capital includes the bank's core capital, which consists of common equity tier 1 (CET1) capital and additional tier 1 (AT1) capital. Total leverage exposure includes on-balance sheet items, derivative exposures, and off-balance sheet exposures. This ratio is used to ensure that banks have enough capital to meet their financial obligations.
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