Basel Committee issues consultative paper on home-host supervisory cooperation and allocation mechanisms in an AMA context

The Basel Committee on Banking Supervision today issued for public comment a paper entitled Principles for home-host supervisory cooperation and allocation mechanisms in the context of Advanced Measurement Approaches (AMA).

The paper sets out principles related to two important topics in the implementation of the Advanced Measurement Approaches for operational risk under Basel II. The first set of principles focuses specifically on supervisory cooperation in the context of banks implementing an AMA. These principles are intended as a supplement to the paper Home-host information sharing for effective Basel II implementation issued by the Committee in June 2006. The second set of principles builds on the 2004 paper Principles for the home-host recognition of AMA operational risk capital and specifically addresses allocation mechanisms developed as part of a hybrid AMA.

"The AMA raises a number of unique implementation challenges," stated Nout Wellink, Chairman of the Basel Committee and President of the Netherlands Bank. "This paper represents an effort to address two of those challenges via a flexible, principles-based approach."

José María Roldán, Chairman of the Basel Committee's Accord Implementation Group and Director General of Banking Regulation at the Bank of Spain, added, "The development of robust allocation mechanisms that meet the needs of both banks and their supervisors has proven particularly challenging. The allocation principles outlined in this paper provide insight into supervisors' expectations in implementing the hybrid AMA and should prove useful to banks and supervisors alike."

Comments are invited by 18 April 2007. All comments will be published on the BIS website unless a commenter specifically requests anonymity. Comments should be addressed to:

Basel Committee on Banking Supervision
Bank for International Settlements
Centralbahnplatz 2
CH-4002 Basel
Switzerland

Alternatively, comments may be sent via e-mail to baselcommittee@bis.org.
(Please use this e-mail address only for submitting comments and not for general correspondence.)