medium · Frm Part 2 Operational Risk
A bank calculates its Standardized Measurement Approach (SMA) capital.
If the Business Indicator Component (BIC) is $2.0 billion and the Internal Loss Multiplier (ILM) is 1.0, what is the operational risk capital, and what does an ILM = 1.0 imply about the bank's loss history?
- 2.0 billion; the bank's average losses are exactly aligned with the BIC benchmark.
- 2.0 billion; the bank has no internal loss data and must use the supervisor's default.
- 1.0 billion; the bank has a superior loss history compared to peers.
- 4.0 billion; the ILM acts as a floor that doubles the BIC.
Sign up free to see the explanation and track your rank →
More Frm Part 2 Operational Risk practice
- Which of the following describes the 'One Big Loss' principle for heavy-tailed (subexponen
- Under the current Basel Standardized Measurement Approach (SMA) for operational risk, whic
- Which of the following is NOT one of them?
- What is the marginal coefficient for the portion of the BI that exceeds 30 billion euros?
- According to standard regulatory definitions (such as SR 11-7), which three components are
- A material change to a model is most likely to be triggered by which event?
- How long is the historical window required for calculating the average annual operational
- In the Bow-Tie analysis framework, where do 'Preventive Controls' sit relative to the oper