In the Standardised Approach of Estimating Credit Risk in Pillar

question 18

Multiple Choice

In the standardised approach of estimating credit risk in Pillar 1 of Basel III,banks:

• A)estimate its own probability of default and effective maturity,while regulator-defined estimates for other credit risk components are used.
• B)assign each balance sheet asset and each off-balance sheet item a risk weight that is derived from either an approved external ratings agency or a weight specified by the regulator.
• C)provides its own estimates for all credit risk items.
• D)provides its own estimates for all interest rate risk items.

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Definitions:

Logical Business Processes

Systematic sequences of activities or tasks that are carried out in a business to achieve a specific goal, ensuring efficiency and effectiveness in operations.

Transactional Analysis

A method and theory of psychoanalysis that involves examining social interactions to identify the ego state of the person communicating, serving as a foundation for interpreting behavior.

Emotional Response

The psychological reaction involving feelings, such as happiness, anger, or sadness, triggered by stimuli or events.

Childhood Experiences

Events, situations, or environments a person was exposed to during their early years, which can significantly influence their development and personality.