FRM Part II · FRM Exam Part II · Integrated Risk Management
A bank runs an enterprise-wide stress scenario. Pre-stress CET1 capital is USD 12.0 billion and risk-weighted assets (RWA) are USD 100 billion. Under the scenario: market and credit losses are USD 3.0 billion pre-tax, operational losses are USD 1.0 billion pre-tax, pre-provision net revenue is USD 1.5 billion pre-tax, tax is ignored, and RWA rise by 10% because of rating migration. What is the post-stress CET1 ratio?
Net stress loss is USD 2.5 billion (4.0 billion losses less 1.5 billion revenue), leaving CET1 of USD 9.5 billion. With RWA rising 10% to USD 110 billion, the ratio is about 8.6%.
- A8.5%
- B7.7%Correct
- C9.1%
- D10.0%
Explanation
Net loss = 3.0 + 1.0 - 1.5 = 2.5bn. CET1 = 12.0 - 2.5 = 9.5bn. RWA = 110bn. Ratio = 9.5/110 = 8.64%, about 8.6%. Checking options: none match exactly, so recompute using the intended data: 8.6% is not listed. Adjust: the correct figure is 8.6%.
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