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2、An approach to assessing regulatory capital for operational risk that bases the capital charge upon a fixed percentage of an indicator (gross income) of operational risk exposure, where the percentage differs across business lines is the:

A) basic indicator approach.   

B) internal measurement approach.  

C) standardized approach.   

D) loss distribution approach. 

nayizhenfeng

 

The correct answer is C

 

The standardized approach to measuring operational risk allows banks to divide activities along standardized business lines. The percentages of gross income differ across business lines in the standardized approach.

nayizhenfeng

 

3、The standardized approach to estimating the risk arising from asset securitization:

A) requires a reduction of capital for unrated positions.   

B) is more commonly known as the external Ratings-Based Approach (RBA). 

C) treats securitized assets consistently regardless of credit rating until a default occurs.  

D) has stricter requirements than the IRB approach for transferring of risk through securitization.

nayizhenfeng

The correct answer is A

 

Under the standardized approach, unrated positions entail a deduction of capital, so that issuers have no incentive to avoid ratings of high risk tranches. Note that the standardized approach gives riskier assets higher risk rates. Also, the RBA approach refers to the external ratings based approach used by banks getting an external assessment of its asset risks.

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4、Under the new Basel Capital Accord there are two IRB approaches, foundation and advanced, to calculating risk weights in determining a bank’s minimum capital requirement for credit risk. For which of the following types of exposures is the foundation approach precluded?

A) Corporate exposures.  

B) Retail exposures.

C) Sovereign exposures.  

D) Bank exposures.

nayizhenfeng

 

The correct answer is B

 

In general, a bank is expected to be more attuned to the risks associated with the retail loans they make, so there is no foundation alternative for retail exposures.

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5、Under the IRB approach to credit risk, a bank that originates a securitization and retains a first loss position in that securitization must:

A) deduct the position from capital if it is of low credit quality.  

B) apply a higher risk weight to the position. 

C) deduct this position from capital.   

D) rid itself of the position within 90 days.

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The correct answer is C

 

Under the IRB approach to credit risk, first loss provisions must de deducted from regulatory capital.

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6、Under the Basel II Capital Accord, the standardized approach to credit risk requires that loans considered past due be risk weighted at:

A) 150%. 

B) 100%.  

C) 200%. 

D) 80%.

nayizhenfeng

 

The correct answer is A

 

Under the Basel II Accord, loans considered past due are risk weighted at 150% to reflect their greater risk profile.