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Division 3 Definition of RAROC under point 3(a) of the commitments

United Kingdom

Original text. Later amendments are not shown.

The RAROC is calculated using the following formula:

EC t =0 = Σ t =1 T Revenues t – EL t – Costs t × 1 – taxes + EC t –1 – EC t 1 + RAROC t

where:

EC

  • economic capital

    • EL

  • expected loss

    • Costs

  • costs allocated to the transaction under the business line