nayizhenfeng

 

AIM 4: Identify the primary goals of the Basel Committee in developing the Basel II Accord.

1、All of the following are pillars of the New Accord, EXCEPT:

A) post 9/11 contingency planning. 

B) supervisory review. 

C) minimum capital requirements. 

D) market discipline.

nayizhenfeng

 

The correct answer is A

 

The three pillars of the New Accord are minimum capital requirements, supervisory review, and market discipline.

nayizhenfeng

 

2、Which of the following is NOT one of the three pillars of the new Basel Capital Accord (Basel II)?

A) Reduced regulatory burden. 

B) Public disclosure. 

C) Supervisory review of capital adequacy. 

D) Minimum capital requirements.

nayizhenfeng

 

The correct answer is A

 

The three pillars are: (1) minimum capital requirements, (2) supervisory review of capital adequacy, and (3) public disclosure.

nayizhenfeng

 

3、Which of the following are pillars central to the Basel II Accord?

      I. Supervisory Review Process.

     II. Standardized Approach.

    III. Minimum capital requirements.

    IV. Market risk weighting.

A) II and IV. 

B) I and III.

C) I, III and IV. 

D) II, III and IV.

nayizhenfeng

 

The correct answer is B

 

The three pillars are minimum capital requirements, Supervisory Review Process, and market discipline.

nayizhenfeng

 

AIM 5: Describe how the necessary components for calculating capital requirements are determined under the standardized and internal ratings-based approaches.

1、For banks that use the advanced internal ratings-based (advanced IRB) approach to credit risk, the primary inputs to the capital calculations are:

A) credit assessments of external rating agencies. 

B) the banks’ internal assessments of key risk drivers. 

C) mandated by bank supervisors. 

D) interest rates.

nayizhenfeng

 

The correct answer is B

 

Under the advanced IRB approach, the bank uses its own internal measures of credit risk and exposure in capital calculations.

nayizhenfeng

 

2、The advanced internal ratings based (IRB) approach to calculating risk weights differs from the foundation IRB approach in that the advanced approach:

A) relies on external estimates for most risk parameters. 

B) allows for internal estimates of loss given default (LGD) and exposure at default (EAD). 

C) offers less flexibility in estimating risk parameters.  

D) allows for internal estimates of probability of default (PD) and exposure at default (EAD). 

nayizhenfeng

 

The correct answer is B

 

The advanced IRB approach offers more flexibility, because it does not rely on external estimates of risk parameters. Both the foundation and advanced approaches allow for internal estimates of PD, but the foundation approach uses external estimates for all other parameters.