Loss distribution approach on agenda
The decision of global bank regulators to look at a range of advanced approaches to measuring operational risk (see front page story) brings the so-called loss distribution approach (LDA) back on the agenda of the Basle II bank accord.
Advocates of LDA believe the method is much more risk sensitive – and therefore more attuned to the spirit of Basle II – than the internal measurement approach put forward in the January consultative paper on Basle II.
With LDA, banks would specify their
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