Standardised approach may receive op risk charge cut, says ECB official
The operational risk charge related to the Basel II ‘standardised approach’ may be cut in the third consultative paper (CP3) due for release next month by the Basel Committee on Banking Supervision, according to Panagiotis Strouzas, a senior expert in the financial supervision division in the European Central Bank’s Directorate of Financial Stability and Supervision.
Strouzas said he had seen the results of the third quantitative impact study (QIS3) and believed the Basel Committee had largely achieved the correct credit risk weighting. But he added that a reduction of operational risk charges for the standardised approach would be reduced to make it more attractive for banks around the world – and particularly in the US – to move from the current Basel I capital Accord to the Basel II standardised approach. It is unclear by how much this operational risk will be reduced, but it will be a factor by which the volume of loans of the bank is multiplied instead of the current proposal related to a multiple of gross income. This will be at the discretion of individual national regulators, said Strouzas.
The treatment of operational risk has been a thorny issue for international regulators, with a number of industry participants claiming that efforts to take established quantitative analysis techniques in market risk and apply it to operational risk is unrealistic.
Banks can implement Basel II via three methods: the most complex is the so-called internal-ratings based approach; the standardised approach is an intermediate-level implementation; and the other option is the ‘basic approach’, which largely draws on the existing Basel I capital requirement definitions. The Basel Committee on Banking Supervision – the body developing the Basel II infrastructure – has a stated objective to reward banks with more sophisticated risk management practices.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
FRTB start dates must align globally, says European Commission
Lawmaker could trigger delay to market risk rules in Europe if US implementation drags on
Fed green lights more capital relief trades
Five US banks authorised to issue repeat credit-linked notes backed by financial guarantees
Basel III endgame: why moving fast might prove better for banks
Republicans are pushing for reproposal, but a rapid finalisation may prove less far-reaching
Isda pushes to ‘decouple’ Simm calibration from model changes
Emir 3.0 prompts effort to separate risk-weight revisions from methodology updates
Basel war on window-dressing may smooth liquidity, at a price
Changes to G-Sib charge could curb year-end repo volatility, but also cut balance sheet capacity
One year on, regulators still want a cure for bank runs
Broad support for higher outflow assumptions on uninsured deposits, but that won’t save insolvent banks
Watchlist and adverse media monitoring solutions 2024: market update and vendor landscape
This Chartis report updates Watchlist monitoring solutions 2022 and focuses on solutions for sanctions (name and transaction) screening and monitoring adverse media and its related elements
Basel Committee reviewing design of liquidity ratios
Focus on LCR and NSFR after Silicon Valley Bank and Credit Suisse, but assumptions may not change
Most read
- Too soon to say good riddance to banks’ public enemy number one
- Basel triggers new tussle on anti-Archegos rules
- Breaking out of the cells: banks’ long goodbye to spreadsheets