Explanation:
Statement C is incorrect. Under the Basel II framework, national supervisors are allowed to permit a bank to use an Alternative Standardized Approach (ASA) provided that the bank meets certain qualifying criteria. Under the ASA, the operational risk capital charge methodology is the same as for the Standardized Approach, but for specific business lines (like retail and commercial banking), loans and advances are used as the exposure indicator instead of gross income.
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Q.64 Which of the following statements about the methodologies for calculating an operational risk capital charge in Basel II is incorrect?
A
The basic indicator approach does not reflect the operational risk in a firm since it uses only income as a driver
B
The standardized approach assumes that different business lines have different multipliers
C
Under no circumstances does Basel II allow a national regulator to permit a bank to use an alternative standardized approach
D
Advanced measurement approaches allow an institution to adopt its own method of assessment of operational risk