Noting that operational risk is present at all banks due to most activities, the U.S. regulatory-capital rewrite would end the current approach to operational risk-based capital (ORBC). This now subjects only categories I and II banks to ORBC and then only to the advanced measurement approach (AMA) premised on each bank’s internal models. Consistent with the overall decision to end internal-model reliance, this section of the proposal subjects categories I, II, III, and IV banks to a new operational-risk standardized approach (SA). This would result in very steep capital requirements based on a bank’s experience over the past ten years compared to various sources of revenue over the past three years, perhaps taking business-model changes over the course of the last three years into account if regulatory standards are met for doing so….
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