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Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition by Youssef F. Bissada, Jean Dermine

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Standardized approach

This is simple. The capital charge is simply a multiple of the gross revenue of an activity, averaged over the last three years. With reference to Stage 3, gross revenue is the sum of net interest margin and non-interest income (such as fees).

Business linesBeta factors
Corporate finance18%
Trading and sales18%
Retail banking12%
Commercial banking15%
Payment and settlements18%
Agency services15%
Asset management12%
Retail brokerage12%

Capital ≥ beta factor × average gross income of last 3 years.

For example, in the case of retail banking, this is calculated as follows:

CapitalRetail ≥ 12% × average gross income of last 3 years.

Again, the risk-weighted asset for operational risk is equal to:

RWAoperational risk = capital × 12.5 ...

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