CEBS seeks views on op risk mitigation

New CEBS guidelines intend to clarify the rules concerning the use of insurance and other risk-transfer mechanisms in the advanced measurement approach (AMA)

LONDON - The Committee of European Banking Supervisors (CEBS) has published a consultation paper regarding its guidelines on operational risk mitigation techniques.

The consultation is open to all interested parties, including supervised institutions and other market participants.

With this paper, the CEBS aims to move forward with respect to the GL10 paper of April 2006, which provided only limited guidance on insurance contracts and other risk-transfer mechanisms (ORTM) for operational risk.

The paper's main objective is to provide appropriate guidelines on the recognition of insurance within the AMA's capital calculation. In particular, the topics addressed cover the issues of eligibility of protection providers, characteristics of eligible products and haircuts for uncertainty of coverage.

A first set of guidelines states that, to use ORTM products within the AMA, experience must be proven, and they cannot be held or used for trading purposes. In addition, the document anticipates the more conservative requirement of the Capital Requirements Directive, which is being considered under the comitology procedure, namely that both insurance contracts and ORTM together should not exceed the 20% limit for capital alleviation.

CEBS presents its guidelines on operational risk mitigation techniques for a public consultation that starts on April 15 and runs until July 7. Comments received will be published on CEBS's website unless respondents explicitly request otherwise. Please send your comments to the following email address: [e-mail].

A public hearing will take place in the beginning of July at CEBS's premises to allow all interested parties to present their comments.

Click here for the guidelines