Op risk managers not sold on SMA alternative

Proposed forward-looking approach would permit internal modelling, but penalise banks if losses exceed estimates

This article is the first in a series focusing on proposed reforms of the operational risk capital framework; the second can be found here.

The Basel Committee on Banking Supervision’s proposed standardised measurement approach (SMA) to calculating operational risk capital requirements has faced a storm of criticism from practitioners, who have decried it as a “messy compromise” that is “not fit for purpose”.

Even regulators appear to be having second thoughts about the package, which would

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