The correct answer is (A) - (IV), (B) - (II), (C) - (I), (D) - (III) +----------------------+--------------------------------------+-------+----------------------------+ | List I - Description | List II - Conceptualisation | | | +----------------------+--------------------------------------+-------+----------------------------+ | (A) | Net Stable Funding Ratio | (IV) | Basel - III norms | | (B) | Innovative Perpetual Debt Instrument | (II) | Tier-I capital | | (C) | Time Maturity Gap | (I) | Asset Liability Management | | (D) | Risk Weighted Assets | (III) | Tier - II capital | +----------------------+--------------------------------------+-------+----------------------------+ Explanation & Key Takeaways: Net Stable Funding Ratio • The net stable funding ratio is a liquidity standard requiring banks to hold enough stable funding to cover the duration of their long-term assets. • Banks must maintain a ratio of 100% to satisfy the requirement. • The Net Stable Funding Ratio (NSFR) and Liquidity Coverage Ratio (LCR) are significant components of the Basel III reforms. Innovative Perpetual Debt Instrument • Tier I Capital consists mainly of share capital and disclosed reserves. Since this capital is fully available to cover the core losses, it is also called Core Capital. For this reason, this is considered the highest quality capital. • IPDIs issued as Tier I cannot exceed 15 percent of total capital. • This limitation is based on the Tier I capital amount as of March 31 of the previous year along with deductions of intangible assets before investment deductions. Time Maturity Gap • Assets Liabilities Management is the process whereby a bank’s total assets and liabilities are controlled and managed simultaneously in an integrated fashion. In the management of the overall balance sheet. • A maturity gap is a term used to describe a strategy that is designed to assess the relationship between the risk of owning assets and liabilities that generate revenue due to interest rate accruals and the volatility of those holdings. Risk-Weighted Assets • Tier II Capital is also known as supplementary capital. It consists of certain reserves and certain types of subordinated debt. • Any loan which is repayable after other debts have been paid is called subordinated debt. Tier 2 capital also has a ratio. • This is the formula utilized to describe the capital being held versus what's known as total risk-weighted assets (RWAs). • Risk-weighted assets are the assets held by the bank that is weighted by its credit risk.