Japan FSA’s simple formula for operational risk capital

A simple formula for operational risk capital

Japan FSA building

Since the introduction of Basel II, there has been a wider and more sophisticated use of operational risk capital (ORC) models, but at the same time, a number of problems have become apparent. The most obvious is that the industry has still not seen an established standard approach for measuring ORC – banks with similar risk profiles but different methods could hold very different levels of capital under the advanced measurement approach (AMA).

Many banks, especially small and medium-sized

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