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The Regulatory Framework

In: Operational Risk Management in Banks

Author

Listed:
  • Giuliana Birindelli

    (“G. d’Annunzio” University of Chieti-Pescara)

  • Paola Ferretti

    (University of Pisa)

Abstract

The current regulatory frameworkFramework underlines operational risk as a significant risk faced by banks and requires coverageCoverage by own funds. It includes provisions for three alternative approaches for calculating operational risk capital requirementsCapital requirement , reflecting the broad diversity among European institutions. These approaches are namely, the (BIA)Basic Indicator Approach (BIA) , the (SIA) and the (AMA)Advanced Measurement Approach (AMA) , which incorporate different levels of risk sensitivity requiring different degrees of sophistication. In this chapter we analyse the main features of all these approaches, highlighting their critical issues. Finally, we shortly describe the last proposals of the Basel Committee, which, among others, propose a new standardized measurement approach for operational riskOperational risk (OR) , as part of the broader objective of balancing simplicity, comparability and risk sensitivity.

Suggested Citation

  • Giuliana Birindelli & Paola Ferretti, 2017. "The Regulatory Framework," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Operational Risk Management in Banks, chapter 0, pages 37-66, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-1-137-59452-5_3
    DOI: 10.1057/978-1-137-59452-5_3
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