Answer: EUR 150 million

The correct operational risk capital that the bank should report under the Standardized Measurement Approach (SMA) is EUR 150 million. This is determined by applying the Business Indicator (BI) of EUR 1,200 million to the appropriate BI range, which is Bucket 2 (EUR 1 billion to EUR 30 billion). According to the SMA guidelines provided, the operational risk capital is calculated by multiplying the Business Indicator Component (BIC) by the Internal Loss Multiplier. Since the Internal Loss Multiplier is 1, the calculation for Bucket 2 is as follows: SMA operational risk capital (Bucket 2) = BIC * 1 = EUR 120 million + 0.15 * (BI - EUR 1 billion) = EUR 120 million + 0.15 * (EUR 1,200 million - EUR 1,000 million) = EUR 150 million. This calculation takes into account the specific formula for Bucket 2, which includes a base amount of EUR 120 million plus an additional amount calculated as 15% of the BI exceeding EUR 1 billion. The result is a total operational risk capital of EUR 150 million, which reflects the bank's operational risk under the SMA as proposed by the Basel Committee.

Author: LeetQuiz Editorial Team