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A Bank subject to the Basel Accord makes a loan of $100m to a firm with a risk weighting of 50%

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A Bank subject to the Basel Accord makes a loan of $100m to a firm with a risk weighting of 50%. What is the basic on balance credit risk charge?

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The basic balance credit risk charge is $4 million.

According to Basel I, the charge on credit risk is 8%. Thus, the total credit risk charge in this case is:

credit risk charge = 100 million * 50% * 8%
credit risk charge = 4 million

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