Explanation:
According to the Basel Committee on Banking Supervision (BCBS), Group 2b crypto assets are those that are unbacked and do not meet the eligibility criteria for hedging or stability. These assets are considered highly speculative and volatile. To account for their risk:
A 1,250% risk weight is applied, which effectively requires banks to hold capital equal to the full value of the exposure. This treatment ensures that the bank has adequate capital to cover the entire potential loss associated with the crypto asset.
A is incorrect: This applies to Group 1a assets.
C is incorrect: This applies to certain Group 1b stablecoins.
D is incorrect: The limit is 1% not 10% and this is an exposure limit, not the risk weighting itself.
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Q.6414 According to the BCBS proposed treatment, how are banks expected to treat exposures to Group 2b crypto assets (unbacked, without hedging)?
A
Apply standard risk weights based on the underlying asset.
B
Apply a 1,250% risk weight, requiring full capital coverage.
C
Apply a lower risk weight if the asset meets specific stability criteria.
D
Limit exposure to no more than 10% of Tier 1 capital.
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