The Basel framework provides three approaches for the measurement of the capital charge for operational risk. The simplest is the Basic Indicator Approach (BIA), by which the capital charge is calculated as a percentage of gross income. The most advanced methodology is the advanced measurement approaches (AMA), which allows banks to use internal models to calculate their capital requirements although the adoption of this model requires prior supervisory approval. The third approach, the Standardised Approach (TSA) requires banks to divide their total gross income into eight business lines and to calculate capital requirements as a sum of the products of the gross income attributed to each business line and the specific regulatory coefficients assigned to each line.

The Basel Committee on Banking Supervision has published a consultative document which sets out proposed revisions to the standardised approach for measuring operational risk capital.  When finalised the revised standardised approach will replace the existing non-model-based approaches which comprise the BIA, the TSA, and the ASA. In addition to streamlining the framework, the new approach will address weaknesses identified in the existing approaches.

The deadline for comments on the consultative document is 6 January 2015.

View Operational risk – Revisions to the simpler approaches – consultative document, 6 October 2014