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Basel requires financial institutions to calculate capital ratios using risk-weighted assets, not total assets because: Financial...

Basel requires financial institutions to calculate capital ratios using risk-weighted assets, not total assets because:

  1. Financial institution’s assets carry varying level of default risk.
  2. Their assets are known as financial assets whose value could change based upon their relative risk.
  3. Total assets includes deposits that are not deemed risky and should carry zero percent risk weight.
  4. Both (a) and (b).
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