A new role for op risk insurance

As expected, the Basel Committee on Banking Supervision said in late September that it is prepared to consider a role for insurance in reducing operational risk capital charges proposed under the Basel II bank capital adequacy accord.

If the regulators were to agree such a role for op risk insurance, it would apply only to banks using advanced approaches to calculating the op risk capital charge. There would also be a limit on the amount by which insurance might reduce the capital charge, and any capital reduction stemming from insurance would be included within the 75% floor of the standardised capital charge.

This is a shift from the Basel regulators' initial view, as expressed in the second consultative paper on the

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