Skip to content

FRM Part II · FRM Exam Part II · Basel III: Finalising Post-crisis Reforms

A regulator reviews which components of the Basel III finalisation package changed the framework for operational risk and credit risk. Which pairing is accurate?

The finalisation replaced all existing operational risk approaches, including the AMA, with a single standardised approach. For credit risk it made the standardised approach more risk-sensitive and restricted internal ratings-based use for certain exposures such as equities and some large corporates.

  1. AOperational risk: all previous approaches including AMA replaced by a single standardised approach; Credit risk: standardised approach made more risk-sensitive and IRB use restricted for certain exposuresCorrect
  2. BOperational risk: AMA retained as the preferred approach; Credit risk: IRB extended to all exposures
  3. COperational risk: basic indicator approach retained as the only option; Credit risk: standardised approach abolished
  4. DOperational risk: replaced by a leverage-based charge; Credit risk: unchanged

Explanation

The package replaced the basic indicator, standardised and advanced measurement approaches with one non-model standardised approach for operational risk. It also revised the credit risk standardised approach and limited IRB approaches, for example removing them for equities. The other options misstate these changes.

Did you get it right without looking?

One question tells you little. A timed set on Basel III: Finalising Post-crisis Reforms shows your real accuracy, how long you take and where you lose marks.

Practise Basel III: Finalising Post-crisis ReformsFree diagnostic mock

More Basel III: Finalising Post-crisis Reforms questions