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      Question

      If a financial institution's exposure to its own group

      entities is already deducted from its Owned Funds to compute its Net Owned Funds (NOF), how is it treated under large exposure limit caps?
      A It is subject to a mandatory double-risk capital weight penalty Correct Answer Incorrect Answer
      B It is completely exempted from large exposure framework limits to prevent double counting Correct Answer Incorrect Answer
      C It must be lumped into the specialized 35% infrastructure project limit Correct Answer Incorrect Answer
      D It is treated as an off-balance sheet item with a mandatory 100% conversion factor Correct Answer Incorrect Answer
      E It requires direct regulatory board validation before every individual reporting cycle Correct Answer Incorrect Answer

      Solution

      Since exposures to certain group entities are already subtracted directly from capital during the calculation of Net Owned Funds (NOF), they are exempt from large exposure concentration ceilings to prevent penalizing the same asset twice.

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