Explanation:
Under the Basel framework, especially following the Fundamental Review of the Trading Book (FRTB), securitization positions are excluded from the Internal Models Approach (IMA) for calculating market risk capital requirements. Banks must use the Standardized Approach to compute capital for assets held under a securitization business model due to the complex and idiosyncratic nature of securitization risks.
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Q.57 Which of the following approaches should banks use to compute capital with respect to assets held under a securitization business model?
A
Internal models approach
B
Standardized approach
C
Advanced measurement approach
D
Revised internal models approach
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