The primary difference between Basel I and the proposed Basel III in converting OBS values to on-balance-sheet credit equivalent amounts is

Question

Quizplus · Accepted Answer

The primary difference between Basel I and the proposed Basel III in converting OBS values to on-balance-sheet credit equivalent amounts is the use of credit ratings in Basel III to assign credit risk weights on the OBS activities. Basel III introduced more granular risk weights based on credit ratings, which enables banks to incorporate more information into their assessments of risk. This change aims to provide a more accurate assessment of the credit risk posed by OBS activities. Option B is incorrect because Basel III introduced five weight classes, not six. Option C is incorrect because Basel II, not Basel III, used the underlying counterparty activity to assign credit risk weights on the OBS activities. Option D is incorrect because only Option A is correct.

The Primary Difference Between Basel I and the Proposed Basel