Zambian banks have been using the Basel I framework for purposes of determining regulatory capital. You work for a Zambian commercial bank and your Chief Executive Officer (CEO) has just received communication from the Bank of Zambia (regulator) to the effect that come January 2020, all banks will be required to comply with the provisions of the Basel Il framework for purposes of regulatory capital computation. Under the standardized approach of Basel Il, is the need to use External credit assessments. In this vein, your CEO has requested you to provide him with a brief write-up by answering the questions below. This is will help him understand the concept of external credit assessment institutions as envisaged under the Basel Il framework. A. What is an External Credit Assessment Institution? B. Outline and describe three types of External Credit Assessment Institutions. Give examples. C. Explain why market participants use and rely on External Credit Assessment Institutions.
Zambian banks have been using the Basel I framework for purposes of determining
regulatory capital. You work for a Zambian commercial bank and your Chief Executive
Officer (CEO) has just received communication from the Bank of Zambia (regulator) to
the effect that come January 2020, all banks will be required to comply with the
provisions of the Basel Il framework for purposes of regulatory capital computation.
Under the standardized approach of Basel Il, is the need to use External credit
assessments. In this vein, your CEO has requested you to provide him with a brief
write-up by answering the questions below. This is will help him understand the concept
of external credit assessment institutions as envisaged under the Basel Il framework.
A. What is an External Credit Assessment Institution?
B. Outline and describe three types of External Credit Assessment Institutions. Give
examples.
C. Explain why market participants use and rely on External Credit Assessment
Institutions.
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