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Answer: Head of Trading, Head of Risk, Credit Committee
Based on the approval hierarchy table: - The loan amount is $135M for an R3 rated company - Looking at the R3 column, we can see the approval thresholds: - $85M or less: No specific approval level shown (likely lower level approval) - $110M: Head of Trading approval - $135M: Head of Risk approval - $160M: Credit Committee approval Since the loan amount is exactly $135M for an R3 company, this falls into the Head of Risk approval category according to the table. However, in credit approval hierarchies, approvals are typically cumulative - meaning that for a $135M R3 loan, it would require approval from: - Head of Trading (since it exceeds $110M threshold) - Head of Risk (since it's at the $135M threshold) - Credit Committee (since it's approaching the $160M threshold for R3 companies) Therefore, all three levels (Head of Trading, Head of Risk, and Credit Committee) would need to approve this loan.
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Sarah is a credit officer at ABC Bank and is trying to get a $135M loan approved for an R3 internally rated company. ABC Bank has the below approval hierarchy.
Exposure in USD
| Internal Rating of Counterparty | R1 | R2 | R3 | R4 | R5 | R6 |
|---|---|---|---|---|---|---|
| 135 | 110 | 85 | 60 | 35 | 10 | |
| 160 | 135 | 110 | 85 | 60 | 35 | |
| 185 | 160 | 135 | 110 | 85 | 60 | |
| Heading of Trading | ||||||
| Head of Risk | ||||||
| Credit Committee |
Who will need to approve this loan?
A
Head of Trading
B
Head of Risk
C
Credit Committee
D
Head of Trading, Head of Risk, Credit Committee
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