This chapter describes the criteria that banks must meet to be able to calculate operational risk capital requirements based on internal risk measurement systems.

Version effective as of 15 Dec 2019

Updated the out of force date to 31 Dec 2022, given the revised implementation date of Basel III announced on 27 March 2020.

Introduction

30.1 Under the Advanced Measurement Approaches (AMA), the regulatory capital requirement will equal the risk measure generated by the bank's internal operational risk measurement system using the quantitative and qualitative criteria for the AMA discussed below. Use of the AMA is subject to supervisory approval.

30.2 A bank adopting the AMA may, with the approval of its host supervisors and the support of its home supervisor, use an allocation mechanism for the purpose of determining the regulatory capital requirement for internationally active banking subsidiaries that are not deemed to be significant relative to the overall banking group but are themselves subject to this Framework in accordance with SCO10. Supervisory approval would be conditional on the bank demonstrating to the satisfaction of the relevant supervisors that the allocation mechanism for these subsidiaries is appropriate and can be supported empirically. The board of directors and senior management of each subsidiary are responsible for conducting their own assessment of the subsidiary's operational risks and controls and ensuring the subsidiary is adequately capitalised in respect of those risks.