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      Question

      Given the following information, what will be the

      capital charge for operational risk as per Basic indicator approach, for year 1 and year 2?
      A 200 crore and 250 crore respectively Correct Answer Incorrect Answer
      B 80 crore and 100 crore respectively Correct Answer Incorrect Answer
      C 120 crore and 150 crore respectively Correct Answer Incorrect Answer
      D 168 crore and 219 crore respectively Correct Answer Incorrect Answer
      E 280 crore and 365 crore respectively Correct Answer Incorrect Answer

      Solution

      Capital charge = 15% * Gross Income Gross Income of year 1 = Net profit + provisions + staff expenses + other operating expenses                                     = 120+240+280+160                                     = 800 Gross Income of year 2 = Net profit + provisions + staff expenses + other operating expenses                                     = 150+290+320+240                                     = 1000 Capital charge for Year 1 = 15% *800 = 120 crore Capital charge for Year 2 = 15% *1000 = 150 crore

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