Unexpected losses are borne by economic credit capital, which is a par

[Anonymous]

Hi,
According to the answer, this one should be b) Economic credit capital, which is part of economic capital. Why is B “Economic credit capital” incorrect?

Question 192 : For a loan portfolio, unexpected losses are charged against:
(a) Credit reserves
(b) Economic credit capital
(c) Economic capital
(d) Regulatory capital

Your Answer is Incorrect

The correct answer is choice ‘c’

Credit reserves are created in respect of expected losses, which are considered the cost of doing business. Unexpected losses are borne by economic credit capital, which is a part of economic capital. Therefore Choice ‘c’ is the correct answer.

[Jeffrey Chudy]

Unexpected losses are borne by economic credit capital, which is a par

[Anonymous]

You are right – the explanation says ‘economic credit capital’ but the answer points to economic capital – now corrected.

Thanks.

[Author]

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