Explanation:
Under the Basel Standardized Measurement Approach (SMA) for Operational Risk, the Business Indicator (BI) is calculated as the sum of three components: the Interest, Lease, and Dividend Component (ILDC), the Services Component (SC), and the Financial Component (FC). These components are averaged over the last three years (20X7, 20X8, and 20X9). Sum of components for each year: 20X7: 1.3 + 2.2 + 1.1 = 4.6 billion 20X8: 1.8 + 2.6 + 1.3 = 5.7 billion 20X9: 1.6 + 1.8 + 1.5 = 4.9 billion Average BI = (4.6 + 5.7 + 4.9) / 3 = 15.2 / 3 = 5.067 billion. The closest value is €5 billion.
Ultimate access to all questions.
Q.33 The following information has been extracted from the P&L of a European bank over a 3-year period:
| Year (ended) | 20X6 | 20X7 | 20X8 | 20X9 |
|---|---|---|---|---|
| Interest, leases and dividends | €950 million | €1.3 billion | €1.8 billion | €1.6 billion |
| Services | €1.6 billion | €2.2 billion | €2.6 billion | €1.8 billion |
| Financial (Net Profit/Loss on the trading book) | €500 million | €1.1 billion | €1.3 billion | €1.5 billion |
Using the Standardized Measurement Approach, the bank’s Business Indicator (BI) for the year ended 31 Dec 20X9 is closest to:
A
€4 billion
B
€5 billion
C
€3.2 billion
D
€500 million
No comments yet.