The measurement of credit risk under the Basel II Accord allows banks to choose between

Question

Quizplus · Accepted Answer

The question asks which choices banks have for measuring credit risk under Basel II. Choice A is correct in that banks can choose the standardized approach used under Basel I. Choice B is not completely accurate as the basic indicator approach would only require an additional 8 percent of capital, not 12 percent. Choice C is also correct in that banks can use an internal rating system but must adhere to strict standards. Therefore, the best choice is E, as it accurately reflects the options available to banks under Basel II.

The Measurement of Credit Risk Under the Basel II Accord