Explanation:
Under the Basel Committee's proposals for the Advanced Measurement Approach (AMA), operational risk capital must be calculated at a 99.9% confidence level over a 1-year time horizon. This means:
This high confidence level reflects the need for banks to be well-protected against extreme operational risk events, while the one-year horizon aligns with typical risk management and regulatory reporting cycles.
Correct Answer: C
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According to current Basel committee proposals, banks using the advanced measurement approach must calculate the operational risk capital charge at a:
A
99 percentile confidence level and a 1-year time horizon.
B
99 percentile confidence level and a 5-year time horizon.
C
99.9 percentile confidence level and a 1-year time horizon.
D
99.9 percentile confidence level and a 5-year time horizon.
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