# What is supervisory formula approach?

## What is supervisory formula approach?

General requirements. Under the proposed rule, a bank using the SFA would determine the risk weighted asset amount for a securitization exposure by multiplying the SFA risk-based capital requirement for the exposure (as determined by the supervisory formula set forth below) by 12.5.

**How do you calculate RWA for credit risk?**

Calculating risk-weighted assets Banks calculate risk-weighted assets by multiplying the exposure amount by the relevant risk weight for the type of loan or asset. A bank repeats this calculation for all of its loans and assets, and adds them together to calculate total credit risk-weighted assets.

### How do you calculate RWA for operational risk?

Operational risk capital requirements (ORC) are calculated by multiplying the BIC and the ILM, as shown in the formula below. Risk-weighted assets (RWA) for operational risk are equal to 12.5 times ORC.

**How do you calculate capital adequacy requirement?**

It is calculated by deducting all liabilities from the total value of an asset (Equity = Assets – Liabilities).

## What is SFA and Ssfa?

This guidance summarizes supervisory expectations about how banking organizations. determine when the simplified supervisory formula approach (SSFA), rather than the supervisory. formula approach (SFA), may be used to calculate risk-weighted assets for securitization.

**What is the formula for calculating risk weight?**

The risk weight used to convert holdings into risk-weighted equivalent assets would be calculated by multiplying the derived capital charge by 12.5 (ie the inverse of the minimum 8% risk-based capital requirement).

### What is RWA in credit risk?

Risk-weighted assets are used to determine the minimum amount of capital that must be held by banks and other financial institutions in order to reduce the risk of insolvency. The capital requirement is based on a risk assessment for each type of bank asset.

**What is PD LGD EAD?**

EAD, along with loss given default (LGD) and the probability of default (PD), are used to calculate the credit risk capital of financial institutions. Banks often calculate an EAD value for each loan and then use these figures to determine their overall default risk.

## What is operational risk RWA?

Operational risk weighted assets (“RWA”) are one of the three components of the denominator of any bank’s risk-based capital ratio. Operational RWA represent 15.6% of the RWA of the 30 globally systemically important banks (“GSIBs”).

**What is capital ratio formula?**

The working capital ratio is Working Capital Ratio = Current Assets / Current Liabilities. Using figures from the balance sheet above for example, the working capital ratio would be 300,000 / 200,000 = a working capital ratio of 1.5.

### How is CD ratio calculated?

To calculate the loan-to-deposit ratio, divide a bank’s total amount of loans by the total amount of deposits for the same period. You can find the figures on a bank’s balance sheet. Loans are listed as assets while deposits are listed as liabilities.

**What does Ssfa stand for?**

SSFA

Acronym | Definition |
---|---|

SSFA | Substitute Service Families Accommodation (UK) |

SSFA | Safe Skies for Africa Initiative (promotes sustainable improvements in aviation safety and security in Africa) |

SSFA | Seattle Society of Financial Analysts (now CFA (Chartered Financial Analyst) Society of Seattle; est. 1974) |