Financial Risk Manager Part 1

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A risk analyst at a financial institution is preparing a report on capital requirements for the senior management team to be used in risk appetite discussions. The analyst compares regulatory capital and economic capital requirements in the report. Which of the following statements is correct for the analyst to include in the report?

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The regulatory capital for credit risk is designed to be sufficient to cover a loss that is expected to be exceeded only once every ten years.

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Regulatory capital is sometimes referred to as going concern capital because it absorbs losses incurred while the bank is still in business.

The most important capital for a bank is regulatory capital, which equals the bank's estimate of its expected losses.

Economic capital is an internal risk measure that reflects the amount of capital needed to ensure a company remains solvent with a high level of confidence, given its risk profile.