Following a sudden downturn in the commercial property market, Crestview Union Bank is forced to write down the value of its commercial loan portfolio by several billion pounds. This severe decline in asset value threatens to push the bank into insolvency by wiping out its net worth. Which microprudential regulatory requirement is specifically designed to ensure that banks have a sufficient buffer of loss-absorbing funds to withstand such asset write-downs?
Requiring the bank to maintain a higher Liquidity Coverage Ratio (LCR) by holding more sovereign debt and cash
Mandating a higher capital adequacy ratio (CAR) so the bank holds a larger proportion of equity capital relative to risk-weighted assets
Lowering the minimum leverage ratio requirement to allow the bank to increase its total lending relative to its equity
Applying macroprudential caps on loan-to-value (LTV) ratios for all commercial real estate transactions
