Ridiculous, flawed, too diverse: op risk models under fire

Using the same dataset but different operational risk models can produce capital numbers billions of dollars apart, critics claim. Regulators say they want more consistency, but it’s not clear how they can achieve it. Matt Cameron reports

If two banks were given the same operational loss data, and asked to calculate a capital requirement on the back of it, the results would be different – a natural consequence of the make-do-and-mend modelling framework that is the advanced measurement approach (AMA). But how different would they be – and how far can divergence go before the rules become meaningless?

Critics claim it has gone too