Which of the Following Is NOT a Criticism of the Basel

question 98

Multiple Choice

Which of the following is NOT a criticism of the Basel I risk-based capital ratio?

• A)All commercial loans are given equal weight regardless of the credit risk of the borrower.
• B)The ratio incorporates off-balance-sheet risk exposures.
• C)Grouping assets into different risk categories may encourage balance sheet asset allocation games.
• D)The treatment does not include interest rate or foreign exchange risk.
• E)The weights in the four risk categories imply a cardinal measurement of relevant risk between each category.

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Definitions:

Exports

Merchandise or services originating from one country and sold to purchasers in another country.

World Bank

A global financial organization that offers loans and grants to the governments of less wealthy nations to support their capital projects.

WTO

World Trade Organization, an international body that deals with the rules of trade between nations, aiming to ensure trade flows smoothly, predictably, and freely.

Dispute Settlement Body

An entity within the World Trade Organization that settles trade disputes between member countries.