Regulators tangle with EL exclusion criteria in op risk

Apparently, the expected loss/unexpected loss (EL/UL) debate isn't restricted to the credit risk arena.

Now that it looks that EL is going to be pushed out of the regulatory capital calculation at the insistence of US regulators, the Basel Committee on Banking Supervision must tangle with how to remove EL from the operational risk calculation as well.

In the third consultation paper from the Basel Committee (CP3), op risk EL could be excluded from the capital calculation if a firm could demonstrate that it is adequately capturing EL in its internal business practices. It must satisfy its

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