SMA data shortfalls ‘make op risk review a must’

New research adds to criticism of proposed op risk capital method

The Bank for International Settlements, Basel
The Bank for International Settlements, Basel
Ulrich Roth

Flaws in regulators' proposed new standard approach to operational risk capital requirements make it essential the framework is reviewed, a new research paper will argue. Patrick McConnell, a visiting fellow at Macquarie University's Applied Finance Centre in Sydney, says the standardised measurement approach (SMA) is too volatile and inconsistent to be practical.

McConnell is not the first to criticise the SMA. Since it was first mooted in October 2015, academics and practitioners have warned

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