Operational risk - Revisions to the simpler approaches

This consultation paper sets out the Committee's proposed revisions to the standardised approach for measuring operational risk capital. Once finalised, the revised standardised approach will replace the current non-model-based approaches, which comprise the Basic Indicator Approach (BIA) and the Standardised Approach (TSA), including its variant the Alternative Standardised Approach (ASA). In addition to streamlining the framework, the new approach will address weaknesses identified in the existing approaches.

A statistically superior measure of operational risk, termed the Business Indicator (BI) is proposed to replace gross income as a key input for determining operational risk capital. In addition, the proposal removes the differentiation by business-line, which was found not to be a significant risk-driver. Instead, size is found to be a significant risk-driver and is incorporated into the new methodology.

The Committee welcomes comments on this consultative document. Comments on the proposals should be uploaded here by Tuesday 6 January 2015. Alternatively, comments may be sent by post to: Secretariat of the Basel Committee on Banking Supervision, Bank for International Settlements, CH-4002 Basel, Switzerland. All comments may be published on the website of the Bank for International Settlements unless a comment contributor explicitly requests confidential treatment.