UK banks saddled with 'blunt' op risk capital add-on

Criticism of Pillar 2 risk insensitivity

Blunt instrument: Pillar 2 proposals insufficiently nuanced, say observers

Despite more than a decade of international effort there is still no consensus on the best way to allocate operational risk capital. The latest attempt arrived on July 29 in the form of the UK Prudential Regulation Authority's (PRA) policy statement on Pillar 2 for operational risk.

In an echo of Churchill's description of democracy as "the worst form of government, except for all the others", one operational risk manager described the Pillar 2 rules as the "least worst" approach to an almost

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