medium · FRM Part 2 Operational Risk
An operational risk event occurs where an operations error leads to a euro5 million loss on a credit facility.
According to the Basel boundary rules, how is this event treated for regulatory capital?
- It is recorded as operational risk in the internal database but capitalized as credit risk.
- It is split roughly 50/50 between the credit risk and operational risk capital charges.
- It is fully capitalized as operational risk under the Basel SMA framework in this case.
- It is ignored entirely for regulatory capital purposes because it was deemed a pure 'accident'.
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