Under the Basel II Accord, when using the Basic Indicator Approach to calculate its operational...

Comprehensive and Detailed In-Depth Explanation:

The Basic Indicator Approach (BIA) under Basel II is a simple method to calculate operational risk capital. It requires banks to hold capital equal to 15% of the average annual gross income over the previous three years, where gross income is defined as net interest income plus net non-interest income (excluding extraordinary items). Only positive gross income years are included in the average. The formula is:

Operational Risk Capital = 15% × (Average Gross Income over 3 years).

This is explicitly stated in the Basel II framework, making C (three years multiplied by 15%) correct. Other options do not align with the BIA requirements.