5.8 The PRA proposed to replace all existing approaches for calculating Pillar 1 operational risk capital requirements with the SA in the Basel 3.1 standards.

5.9 Nine respondents expressed broad support for this proposal. However, there were a number of responses that provided comments on the appropriateness of specific elements within the SA methodology.

• Two respondents requested that the SA recognise hedging or insurance against future losses.

• One respondent requested that dividends used to repatriate capital should be excluded from the BI.

• One respondent questioned why the services component of the BI does not include offsets or a cap, arguing that higher services revenues would inappropriately result in higher capital requirements.

5.10 A number of responses also provided broader comments about the SA methodology.

• Three respondents argued that, while they agreed that generally larger organisations are more exposed to operational risk and the SA should recognise this, that assumption may not apply to 'large and simple' organisations like building societies.

• One respondent noted that under the SA, operational risk capital requirements at a consolidated level are likely to be greater than the sum across subsidiaries.