The Primary Difference Between Basel I and the Proposed Basel

question 80

Multiple Choice

The primary difference between Basel I and the proposed Basel III in converting OBS values to on-balance-sheet credit equivalent amounts is

• A)the use of credit ratings in Basel III to assign credit risk weights on the OBS activities.
• B)the use of six weight classes by Basel III rather than four classes.
• C)the use of the underlying counterparty activity in Basel II to assign credit risk weights on the OBS activities.
• D)All of the options.
• E)a heavier reliance on the use of ratings by external credit rating agencies for the assignment of assets to weight classes and the use of the underlying counterparty activity in Basel II to assign credit risk weights on the OBS activities.

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Definitions:

Cafeteria

A type of food service location within an institution where there is a selection of different meals available, generally serving food in a self-service manner.

Service Department

A division within a company that performs support functions, aiding the production or sales departments but not generating revenue directly.

Information Technology

The use of computers, storage, networking and other physical devices, infrastructure, and processes to create, process, store, secure, and exchange all forms of electronic data.

Operating Departments

Divisions within an organization directly involved in its core business activities, such as production or sales.