Research on loss data backs up new Basel op risk charge

Study finds op risk losses can be scaled in the same way as tests on engineering models

Test flight: scaling up data from aircraft models is comparable with loss data

The proposed replacement of internal models for operational risk capital with a standardised measurement approach (SMA) has been widely criticised, but forthcoming research from the Journal of Operational Risk is set to justify the SMA's relatively simple approach – by showing that, despite different scales and frequencies, all types of op risk loss have the same underlying behaviour.

Under the current advanced measurement approach (AMA), banks are free to take four broad categories of input –