📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!

    âš¡ Month End Offer - Flat 52% Off On All Courses! Enroll Now âš¡
    00:00:00 AM Left

    Question

    What is the alpha factor set by Basel Committee relating

    to the industry wide level of required capital for operational risk, under the Basic Indicator Approach?
    A 10% Correct Answer Incorrect Answer
    B 15% Correct Answer Incorrect Answer
    C 20% Correct Answer Incorrect Answer
    D 25% Correct Answer Incorrect Answer
    E 30% Correct Answer Incorrect Answer

    Solution

    Basic Indicator approach (BIA): Banks using this approach, bank must hold capital for operational risk equal to the average over the previous three years of a fixed percentage of positive annual gross income. Formula:  KBIA= (Sigma (GI...n * alpha)/n ·         KBIA - capital charge under BIA, ·         GI annual gross income, ·         n - number of previous years ( Eg:3) ·         Alpha factor =15% is set by Basel Committee relating to the industry wide level of required capital

    Practice Next
    More Financial Management Questions

    Relevant for Exams:

    ask-question