Explanation:
For the standardized approach, CBI must apply different beta factors to specific business lines. The amounts are multiplied by the average annual gross income over the past 3-year period.
Average annual gross revenues for retail banking:
million
Average annual gross revenues for commercial banking:
million
Average annual gross revenues for corporate finance:
million
Operational risk capital requirement:
$0.12(350) + 0.15(652) + 0.18(770) = 278.4$ million
(Book 4, Module 53.1, LO 53.b)
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Question 51
Canadian Bank, Inc. (CBI) has the following annual gross income amounts in its business lines over its most recent three years:
| 2018 | 2017 | 2016 | |
|---|---|---|---|
| Retail banking | $380 million | $344 million | $326 million |
| Commercial banking | $712 million | $645 million | $599 million |
| Corporate finance | $846 million | $777 million | $687 million |
Using the standardized approach, which of the following amounts represents CBI's operational risk capital requirement for 2019? (Assume that the beta factors for retail banking, commercial banking, and corporate finance are 12%, 15%, and 18%, respectively.)
A
$253.2 million.
B
$265.8 million.
C
$274.9 million.
D
$278.4 million.
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