Explanation:
To answer the question, it’s important to have the BI bucket divisions and corresponding marginal coefficients as outlined in Basel III reforms.
| BI Bucket | 1 | 2 | 3 |
|---|---|---|---|
| BI Range | ≤ 1 bn | €1 bn < BI ≤ €30 bn | €30 bn |
| Marginal BI Coefficient | 0.12 | 0.15 | 0.18 |
| BI of €40 | €1bn × 12% = €0.12bn | € = (30 − 1) × 15% = €4.35bn | = €(34.5 − 30) × 18% = €0.81bn |
BIC = Sum of buckets 1 to 3 = €5.28bn
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