The Primary Difference Between Basel I and the Proposed Basel

question 62

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 these.
• E)the use of credit ratings in Basel III to assign credit risk weights on the OBS activities, 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:

Monthly Contributions

Regular payments made into a financial scheme, savings, or investment plan every month.

Interest Earned

The amount of money gained as interest from an investment or savings over a period of time.

Compounded Monthly

A method of calculating interest where the accumulated interest is added to the principal at the end of each month, leading to an increase in the amount of future interest.

Compounded Quarterly

The method of calculating interest by adding the interest to the principal amount on a quarterly basis, which then earns additional interest in the subsequent quarters.