Regulators remain fuzzy on practicalities of AMA group allocation approach
London and New York -- Both US and UK regulators offered only clues about how the various controversies surrounding the group allocation issue would be resolved at OpRisk Europe and OpRisk USA, hosted by Incisive Media in March. This was in spite of the fact that the industry representatives present at both events indicated that an immediate and deeper understanding of the regulator’s approach was essential for firms who were racing against the December 31, 2006 deadline for advanced measurement approach (AMA) implementation.
"This is the last big issue on the frontier for the AMA," said Jay Newberry, head of operational risk at Citigroup in New York. In a nutshell, under the AMA, banks are faced with the need to produce an operational risk capital model of which all of their regulators approve. Then, regulatory capital must be divided up among various legal entities. Tension exists because firms don’t want to have to get approval from both home and host regulators for their models, and they want to be able to
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