nayizhenfeng

 

The correct answer is C

 

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

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.

nayizhenfeng

 

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

 

6、Tier 1 capital is composed of all of the following EXCEPT:

A) common equity.  

B) non-cumulative perpetual shares. 

C) minority equity interest.  

D) cumulative perpetual shares. 

nayizhenfeng

 

The correct answer is D

 

Cumulative perpetual shares is a component of tier 2 capital.

nayizhenfeng

 

AIM 3: Describe the Basel II Accord’s requirements for calculating risk-weights using both the standardized and the internal ratings-based approaches when accounting for credit risk.

1、Which of the following assets requires a 0 percent risk weighting according to the Basel Accord?

A) Cash receivables.  

B) Cash. 

C) Residential mortgages. 

D) Industrial real estate investments.

nayizhenfeng

 

The correct answer is B

 

Cash is the only asset that allows a zero percent risk weighting in the list.

nayizhenfeng

 

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.