For measuring capital requirement for operational risk, we have three approaches1. BIA basic indica

For measuring capital requirement for operational risk, we have three approaches1. BIA basic indicator approach2. Standardized approach3. Advanced measurement approach.As per RBI guidelines banks in india use BIA approach , under this approach a common factor of all business lines is given as Alpha. Value of alfha is fixed as 15%. So capital for op. Risk is calculated as 15% of the average profits made by the bank for last three years. If a bank has booked a loss , the loss figure is not included.Under standardized approach bank business has been divided into eight business lines and each business line has been given a risk factor and this factor is known as Beta factor, like 18%, 12%...... which u can also get from the question given. For calculating capital requirement under standardized approachCalculate 18% of 2670. It comes to 480.60.Caculate all and sum up the values i.e. 480.60 +2nd value and so on , u wl get the answer.One more thing if u take an average of risk factor percentages as given in standardized approach, it also.comes to 15%.

 

Remember when we find mean or average we add up all the terms and divide it by the number of terms. So keep in mind if bank has made.profits for two years. The average will be sum of profit for two yeras /2.

 

Based on dis today there is 5 questions in today bfm exam.....But no clarity how to solve....