Applicable to all institutions

1. Institutions may use either the simpler approaches (i.e. Basic Indicator Approach, Standardised Approach or Alternative Standardised Approach) or the Advanced Measurement Approach (AMA) to calculate the capital requirement for operational risk, provided that the corresponding provisions are complied with. Institutions should ensure that operational risks are sufficiently and adequately stressed; however, in the AMA some requirements already include stress testing components.

2. The stress assumptions may be different from the ones used in credit and market risk stressed scenarios and should be based on external (for example damage to tangible assets due to a natural disaster) and internal events (such as new products, systems, areas of business and outsourced activities.). Especially in new areas with a lack or scarcity of loss data, stress tests may be based on scenario analysis.

3. Besides stressing the operational risk capital requirements, institutions should consider whether an operational risk scenario might impact capital planning analysis.

4. A robust analysis of major operational risks includes stresses and analyses of historical and hypothetical operational risk events and assessments of the adequacy of the capital calculated against these stressed events.