Standardised Measurement Approach for operational risk - consultative document.
In October 2014, the Committee proposed revisions to the standardised approaches for calculating operational risk capital. This updated consultative document proposes further revisions to the framework, which emerged from the Committee's broad review of the capital framework.
The Committee's review of banks' operational risk modelling practices and capital outcomes revealed that the Advanced Measurement Approach's (AMA) inherent complexity, and the lack of comparability arising from a wide range of internal modelling practices, have exacerbated variability in risk-weighted asset calculations, and eroded confidence in risk-weighted capital ratios. The Committee is therefore proposing to remove the AMA from the regulatory framework.
The revised operational risk capital framework will be based on a single non-model-based method for the estimation of operational risk capital, which is termed the Standardised Measurement Approach (SMA). The SMA builds on the simplicity and comparability of a standardised approach, and embodies the risk sensitivity of an advanced approach. The combination, in a standardised way, of financial statement information and banks' internal loss experience promotes consistency and comparability in operational risk capital measurement.
The Committee welcomes comments on all aspects of this consultative document and the proposed standards text. Comments on the proposals should be uploaded here by Friday 3 June 2016. All comments will be published on the website of the Bank for International Settlements unless a respondent specifically requests confidential treatment.
- Publication Date: March 2016
- Publication Type: Consultative
- Publication Status: Closed
- Publication Category: Operational Risk
- Number of Pages: 18
- Keywords: Operational Risk, AMA, Measurement, Standardised Approach, Business Indicator, Loss Experience
For definitive information on regulatory matters always consult primary sources, especially where it concerns legally binding rules and regulations.
The above regulatory document abstract is quoted verbatim in this Open Risk Manual entry and provided free of charge for the convenience of all internet users. There is no explicit or implicit endorsement of this web service by the Bank of International Settlements. The copyright of the included material rests with the original authors (Links to the original texts are duly provided).