Assume That the Maximum Loss as a Percentage of Capital $\times$

question 49

Multiple Choice

Assume that the maximum loss as a percentage of capital is 12 per cent of an FI's capital to a particular sector and that the amount lost per dollar of defaulted loans in this sector is 35 per cent. What is the concentration limit (round to two decimals) ?

• A) 12% \(\times\) (1/0.35) = 34.29%
• B) 35% \(\times\) (1/0.12) = 4.2%
• C) 12% / (1 + 0.35) = 8.89%
• D) 35% / (1 + 0.12) = 31.25%

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Customer Number

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