Operational risk Margin - DCAT - Spring 2017 Q21

adilviraniadilvirani
in OSFI.MCT

Hi @javid,

In this question, it mentions that "Assume that the MCT total uncapped operational risk margin is less than 30% of the
sum of asset and insurance risk."

How I perceive this is, cap is always 0.30(Insurance + Market + Credit risk margins). So the above statement means that currently the operational risk margin is compA + compB, meaning uncapped is lower than the capped, and hence the operational risk margin is equal to the comp(A) + comp(B). If market risk changes(equity component), it would only affect the cap(CR0)correct? and hence uncapped was lower than capped, we should still use operational risk margin as 5000 which is lower of 5000 and 0.30 of new CR0. So I think operational risk margin should still be 5000 even in DCAT scenario. Please let me know why in examiner report they have decreased the operational risk margin.

Thanks in advance

Cheers
Adil

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