Calculate the capital charge for operational risk using the Standardized Approach with the Three-Year Average (TSA) method
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Question:
Annual Gross Income (GI) Data:
Year 1: GI: $100,000,000
Year 2: GI: $120,000,000
Year 3: GI: $140,000,000
Beta factors for 8 business lines:
Corporate Finance: β = 18%
Trading and Sales: β = 18%
Retail Banking: β = 12%
Commercial Banking: β = 15%
Payment and Settlement: β = 18%
Agency Services: β = 15%
Asset Management: β = 12%
Retail Brokerage: β = 12%
For simplicity, we assume that the GI is evenly distributed across all 8 business lines for each year.
Thus, this bank is required to hold a minimum of $____________ in regulatory capital to cover the operational risk exposure.
Related Book For
Equity Asset Valuation
ISBN: 978-0470571439
2nd Edition
Authors: Jerald E. Pinto, Elaine Henry, Thomas R. Robinson, John D. Stowe, Abby Cohen
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