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A critique of the advanced measurement approach to regulatory capital against operational risk

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Abstract

The advanced measurement approach (AMA) proposed by the Basel Committee to calculate regulatory capital against operational risk is problematical because there is no consensus on what constitutes this approach, because its implementation is difficult, and because !it is unlikely to pay off in terms of costs and benefits. It is argued that there is no obvious reason why the AMA would produce lower capital charges than the less sophisticated approaches, and that the development of internal models of operational risk should not be motivated by regulatory considerations.

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Authors and Affiliations

  1. Department of Accounting and Finance, Monash University, PO Box 197, Caulfield East, 3145, Victoria, Australia

    Imad A Moosa

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  1. Imad A Moosa
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Correspondence to Imad A Moosa.

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1 Imad A. Moosa is currently Professor of Finance at Monash University, Melbourne. Before taking on the present position, he was Professor of Finance at La Trobe University and Lecturer in Economics and Finance at the University of Sheffield. Prior to becoming an academic in 1991, he was a professional economist and a financial journalist for over ten years, and he also worked as an economist at the Financial Institutions Division of the Bureau of Statistics, the International Monetary Fund (Washington DC). Professor Moosa has published nine books and over 140 papers in international journals. He has also written for the prestigious Euromoney magazine. He has served in a number of advisory positions, including his role as an economic advisor to the US Treasury.

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Moosa, I. A critique of the advanced measurement approach to regulatory capital against operational risk. J Bank Regul 9, 151–164 (2008). https://doi.org/10.1057/jbr.2008.7

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