BCBS is a committee of banking supervisory authorities that was established by the central bank governors of the G-10 countries in 1974 with a proposal of working towards building new international financial structures with the goal of minimizing credit risk in financial sector. Basel accord is the guidelines on regulatory standards formulated by Basel committee on…
Subordinated debt refers to the debt owed to an unsecured creditor. In the event of the bankruptcy or liquidation of the debtor, the court will prioritize the outstanding loans which the liquidated assets shall repay. Therefore, subordinated debt can only be paid if any assets left after the claims of secured creditors have been met.…
A business usually owns capital assets like Plant and machinery, land and building, equipment etc. The values of these assets are periodically depreciated over their useful life span both for accounting and tax purposes. The revaluation of assets is stark opposite to planned depreciation where the recorded decline in value of these assets tied down…
Deferred Tax Liability (DTL) can be defined as Provision for Future Taxation or an obligation to pay taxes in the future.The DTL reported on an organization’s balance sheet represents the net difference between the taxes that are paid in the current accounting period and the tax that is assessed or is due for the current…
Assume, a bank keeps all the deposits collected from the customers in its vaults. It is an ideal situation to a bank that it has large quantity of liquid capital to return the money back to the depositors as and when they demand it. However, keeping customer’s deposits without using doesn’t earn any money to…
A ‘Swap’ is an act of exchanging one thing for another. In derivative market, currencies swap, interest rates swap or commodities swaps are most common. Currency Swap: When buying and selling of a foreign currency with different delivery dates simultaneously take place, it is called SWAP transaction. Currency swaps are used to hedge interest rate…
The term capital reserve is sometimes used for the capital buffers that banks have to establish to meet regulatory requirements which are different from cash reserves that banks to maintain as per Central Bank (RBI) regulations. In general terms, a capital reserve is an account on the balance sheet of a company that can be…