Basel committee clarifies calculation of expected operational risk losses for AMA
The Operational Risk Subgroup of the Basel Committee Accord Implementation Group (AIGOR) has released further guidance on how banks can adequately capture expected losses (EL) in their business practices.
Basel II allows banks to base their operational risk capital calculations on unexpected losses (UL) alone if the bank can demonstrate that it is adequately capturing expected losses in its business practices. The bank must satisfy its national supervisor that it has measured and accounted for its EL exposure.
AIGOR provided the guidance in the November Basel Committee Newsletter, in response to requests by the banking industry.
AIGOR says issues that warrant the guidance include: the disparity
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