[amp_mcq option1=”Market Discipline” option2=”Minimum Capital Requirement” option3=”Risk oriented Supervision” option4=”Supervisory Review Process” correct=”option1″]
The correct answer is A. Market Discipline.
The three pillars of Basel II norms in banking industry are:
- Pillar 1: Minimum Capital Requirements
This pillar sets out the minimum capital requirements for banks. The capital requirements are based on the riskiness of the bank’s assets.
- Pillar 2: Supervisory Review Process
This pillar requires banks to have a strong internal risk management system and to be subject to regular supervisory review by the authorities.
- Pillar 3: Market Discipline
This pillar encourages market participants to take into account the riskiness of banks when making investment decisions.
Market discipline is not one of the three pillars of Basel II norms in banking industry.