Originally Posted by Allacalander
In the Study note 142-08, they list two calcuations for the RBC ratio and I don't see how they are equivalent.
The first calculates it as TAC/ACL/2 (although other papers just give TAC/ACL, but that's not where I'm lost.)
Then a few lines down they give the following formula (TAC-C1)/(C2+C3+C4)
How do these agree? Or another question: what is ACL in terms of the individual C risk components?
Based on the RBC ratio forumula in SN 142, I would imagine the formulas are identical, but the risk components in the denominator for RBC ratio are the expected C2, C3, and C4, while the components for the ACL (being the minimum required regulatory capital) would have some margin for adverse deviation? So one IS the other with more conservatism is what I think the difference is.