Under thebasic indicator approach to determining operational risk capital, operational risk capital is equal to:

Choice 'a' is the correct answer. According to theBasel II document, banks using the Basic Indicator Approach must hold capital for operational risk equal to the average over the previous three years of a fixed percentage (denoted alpha, and currently 15%) of positive annual gross income. Figures for anyyear in which annual gross income is negative or zero should be excluded from both the numerator and denominator when calculating the average.