The U.S. version of the Basel II Accord includes the advanced measurement approach (AMA) in the global operational risk-based capital (ORBC) requirements. Although the world has of course now moved on to Basel III,3 the ORBC provisions in Basel II remain unchanged and thus continue to govern the largest U.S. banks. As a result, U.S. regulators have issued new guidance on the AMA, readying this for implementation even as the broader Basel III framework remains to be proposed in the U.S. The ORBC rules are a costly add-on for all banks under the Basel II/III framework, but especially so for non-traditional banks (e.g., asset managers) and those experiencing higher levels of legal risk. It may also come to be important for non-bank firms (e.g., asset managers) if they are dubbed systemic institutions under the Dodd-Frank Act and, then, become subject to systemic-capital charges.
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