Explanation:
The operational risk capital requirement can be summarized as follows:
Operational risk capital = BIC × ILM
where:
Business Indicator Component (BIC) = ∑(αᵢ × BIᵢ)
αᵢ is the BI coefficient for business line i, and BIᵢ is the business line indicator
ILM = internal loss multiplier = 1
Thus, value of the capital requirement = (48 × 0.08) + (44 × 0.10) + (20 × 0.12) = 10.64
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Q.3099 An American bank has the following exposure:
| Business line | BI coefficient | Business line relevant indicator |
|---|---|---|
| A | 8% | 48 |
| B | 10% | 44 |
| C | 12% | 20 |
The bank’s supervisor has set an internal loss multiplier of 1. The capital requirement for operational risk for the bank, using the standardized approach, is equal to:
A
10.0
B
10.64
C
5.76
D
12.0
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