Your bank has HKD 12 billion in revolving credit facilities, of which 70% is currently drawn. For economic capital purposes, the bank uses a capital charge of 4.0% for revolving credit equivalent factor were raised to 0.75, how much additional economic capital would have to be allocated for the revolving credit facilities exposure?
A.HKD 36 million
B.HKD 58 million
C.HKD 84 million
D.HKD 120 million
Answer:A
Initial Economic Capital =(12000*0.70+(12000*(1-0.7)*0.50))*0.04=408 million
Final Economic Capital =(12000*0.70+(12000*(1-0.7)*0.75))*0.04=444 million