One of the main priorities of the Basel Committee is to establish consistency in the application of global bank standards as it will improve the resilience of the global banking system, promote public confidence in regulatory capital ratios and encourage a level playing field for internationally active banks.
In this regard, in October 2014 the BCBS published for consultation a revised Standardised Approach for operational risk that sought to address weaknesses in the existing standardised approaches. In the light of this revision, the BCBS has decided to standardise the estimation of regulatory capital for the entire operational risk framework and it has therefore determined that the withdrawal of internal modelling approaches for operational risk regulatory capital from the Basel framework is warranted.
The technical note prepared by Management Solutions’ R&D department analyses the new standardised framework for operational risk proposed by the BCBS and gives detail on the main components necessary for the SMA’s calculation.
The revised operational risk framework establishes the implementation of the Standardised Measurement Approach and the withdrawal of the AMA although the timeline has not been set.
Scope of application:
This consultation document applies to internationally active banks on a consolidated basis and supervisors could apply the SMA framework to non-internationally active institutions.
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