Under the previous Basel II approach, which was not an approach for operational risk?

Overview of Basel II Approaches for Operational Risk

Basel IIintroducedthreemain approaches tocalculating capital requirements for operational risk:

Basic Indicator Approach (BIA)

The Standardized Approach (TSA)

Advanced Measurement Approach (AMA)

Why Answer D is Correct

Alternative Measurement Approach (AMA)isnot a recognized Basel II approach.

The correct term under Basel II wasAdvanced Measurement Approach (AMA).

Why Other Answers Are Incorrect

Option

Explanation

A. Basic Indicator Approach (BIA).

Correct– A simple approach where capital is set as a fixed percentage of gross income.

B. The Standardized Approach (TSA).

Correct– Categorizes operational risk into business lines, each with assigned risk factors.

C. Advanced Measurement Approach (AMA).

Correct– Usesinternal modelsto calculate capital requirements based on loss data, scenario analysis, and risk controls.

Basel II Framework for Operational Risk (2004)

PRMIA Risk Management Guidelines

PRMIA References for Verification