Q17
For part a)...
Why is there no "Operating risk factor" of 1.03 multiplying along with the "0.5" factor? Is there a reason that was excluded? Or is 1.03 not typically part of the formula?
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For part a)...
Why is there no "Operating risk factor" of 1.03 multiplying along with the "0.5" factor? Is there a reason that was excluded? Or is 1.03 not typically part of the formula?
Comments
In 2017, operating risk was not part of the RBC framework. The factor of 1.03 was introduced a few years later.
The factor of 1.03 was introduced as a way to account for operational risks, such as failures in internal processes, people, systems, or external events, which had not been explicitly accounted for in earlier RBC versions.