nayizhenfeng

 

2、If a supervisory backtest for a 1-year period results in 127 exceptions, then the bank’s exposure would be classified as:

A) Green zone, and an exposure multiplier of 1.0 would be applied.  

B) Yellow zone, and an exposure multiplier of 1.0 would be applied. 

C) Red zone, and an exposure multiplier of 1.33 would be applied.  

D) Yellow zone, and an exposure multiplier between 1.1 and 1.3 would be applied.

nayizhenfeng

 

The correct answer is D

 

For 127 exceptions, the exposure multiplier would be 1.17, in the yellow zone.

nayizhenfeng

 

AIM 14: Discuss the three methods for addressing operational risk under the Basel II Accord.

1、The most data intensive approach to assessing regulatory capital for operational risk is the:

A) basic indicator approach.  

B) standardized approach. 

C) foundation internal ratings based approach.  

D) advanced measurement approach. 

nayizhenfeng

 

The correct answer is D

 

The most data intensive approach to assessing regulatory capital for operational risk is the advanced measurement approach. Note that the foundation internal ratings-based approach is used for assessing credit risk.

nayizhenfeng

 

2、The Basel II Accord recommends basic methods for assessing operational risk that estimate the risk by:

A) applying a floating percentage to operating assets based on their risk profiles.  

B) adding a premium to the credit risk measures used by the bank. 

C) adjusting the required capital by a fixed percentage of total bank assets.   

D) multiplying annual gross income by a set percentage. 

nayizhenfeng

 

The correct answer is D

 

The basic indicator approach and the standardized approach both multiply gross income by a set percentage to estimate operational risk.

nayizhenfeng

 

3、Regulators have proposed several approaches to determining a bank’s operational risk exposure. One approach which would allow each bank to use its own internal loss data to calculate the capital charge is the:

A) basic indicator approach.  

B) proprietary risk approach.

C) advanced measurement approach.  

D) internal factor approach.

nayizhenfeng

 

The correct answer is C

 

Under the advanced measurement approach, each bank would use their own internal loss data to calculate the capital charge within standards set by the supervisor.

nayizhenfeng

 

4、An approach to assessing regulatory capital for operational risk that bases the capital charge upon a fixed percentage of some measure (e.g., gross income) of operational risk exposure is the:

A) standardized approach.  

B) internal measurement approach. 

C) basic indicator approach.  

D) loss distribution approach. 

nayizhenfeng

 

The correct answer is C

 

A fixed percentage of gross income is used in the basic indicator approach.