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What is the concentration limit

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Problem 1: Assume that the maximum loss as a percentage of capital is 9% of an FI s capital to a particular sector and that the amount recovered per dollar of defaulted loans in this sector is 70%. What is the concentration limit (round to two decimals)?

a) 9% x (1/0.7) = 12.86%
b) 9% x [1/(1-0.7)] = 30.00%
c) 70% / (1/0.09) = 6.30%
d) (100% - 70%) / (1/0.09) = 2.70%

Reference no: EM132918575

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