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CAIIB-BFM-CASE STUDIES


ABC Bank provides following information:

Rs.in crores - 1 st year

Net profits - 250
Provisions - 300
Staff expenses - 350
Other operating expenses - 150
Other income - 400

Rs.in crores - 2nd year

Net profits - 200
Provisions - 250
Staff expenses - 300
Other operating expenses - 250
Other income - 500

Answer the following questions, based on the above information :

1. What is the amount of capital charge for operational risk, on the basis of 1st year results alone as per Basic indicator approach?

Capital charge = Gross income * 15%

Gross income = net profit + provisions + staff expenses + other operating expenses
= 250 + 300 + 350 + 150 = 1050 cr

Capital charge = 1050 * 15% = 157.50 cr


2. What is the amount of capital charge for operational risk, on the basis of 2nd year results alone as per Basic indicator approach?

Capital charge = Gross income * 15%

Gross income = net profit + provisions + staff expenses + other operating expenses
= 200 + 250 + 300 + 250 = 1000 cr

Capital charge = 1000 * 15% = 150 cr

3. What is the amount of capital charge for operational risk, on the basis of 1st and 2nd year results as per Basic indicator approach?

Capital charge = Gross income * 15%

Gross income = net profit + provisions + staff expenses + other operating expenses
1st year = 250 + 300 + 350 + 150 = 1050 cr
2nd year = 200 + 250 + 300 + 250 = 1000 cr
Average gross income =(1050 + 1000) / 2 = 2050 / 2 = 1025 cr

Capital charge = 1025 * 15% = 153.75 cr

4. What is the amount of risk weighted assets for operational risk as per Basel 2 recommendations, on the basis of 1st year results alone, as per Basic indicator approach?

RWA = Capital charge / 8%
= 157.50 / 8%
= Rs.1968.75 cr

5. What is the amount of risk weighted assets for operational risk as per Basel 2 recommendations, on the basis of 2nd year results alone?

RWA = Capital charge / 8%
= 150 / 8%
= Rs.1875 cr

6. What is the amount of risk weighted assets for operational risk as per Basel 2 recommendations, on the basis of 1st year and 2nd results?

RWA = Capital charge / 8%
= 153.75 / 8%
= Rs.1921.88 cr


-------------------------------------------------


ABC Bank provides following information:

Rs.in crores -1 st year

Net profits - 120
Provisions - 240
Staff expenses - 280
Other operating expenses - 160
Other income - 320

Rs.in crores - 2nd year

Net profits - 150
Provisions - 290
Staff expenses - 320
Other operating expenses - 240
Other income - 460

Answer the following questions, based on the above information :

1. What is the amount of capital charge for operational risk, on the basis of 1st year results alone as per Basic indicator approach?

Capital charge = Gross income * 15%

Gross income = net profit + provisions + staff expenses + other operating expenses
= 120 + 240 + 280 + 160 = 800cr

Capital charge = 800 * 15% = 120 cr


2. What is the amount of capital charge for operational risk, on the basis of 2nd year results alone as per Basic indicator approach?

Capital charge = Gross income * 15%

Gross income = net profit + provisions + staff expenses + other operating expenses
= 150 + 290 + 320 + 240 = 1000cr

Capital charge = 1000 * 15% = 150 cr

3. What is the amount of capital charge for operational risk, on the basis of 1st and 2nd year results as per Basic indicator approach?

Capital charge = Gross income * 15%

Gross income = net profit + provisions + staff expenses + other operating expenses
1st year = 120 + 240 + 280 + 160 = 800cr
2nd year = 150 + 290 + 320 + 240 = 1000cr
Average gross income =(800 +1000)/2 = 900cr
Capital charge = 900 * 15% = 135 cr

4. What is the amount of risk weighted assets for operational risk as per Basel 2 recommendations, on the basis of 1st year results alone, as per Basic indicator approach?

RWA = Capital charge / 8%
= 120 / 8%
= Rs.1500 cr

5. What is the amount of risk weighted assets for operational risk as per Basel 2 recommendations, on the basis of 2nd year results alone?

RWA = Capital charge / 8%
= 150 / 8%
= Rs.1875 cr

6. What is the amount of risk weighted assets for operational risk as per Basel 2 recommendations, on the basis of 1st year and 2nd results?

RWA = Capital charge / 8%
= 135 / 8%
= Rs.1687.50 cr

……………………………………………………………………………………………………………………………………………

 


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