Revisions to Operational Risk
Chapter 8 describes the current operational risk framework, the final specifications of the proposed standardised measurement approach (SMA) for its estimation under the final Basel III (BCBS, Basel III: Finalising post-crisis reforms—Standards, 2017), and their comparison with the initial proposals for the SMA (BCBS, 2016b).
Within the description of SMA methodology, Chap. 8 compares the core SMA proposals with the alternative specifications proposed by the authors. Also, the chapter presents the interaction between the business indicator component and the internal loss multiplier and infers the sensitivity of how banks’ operational risk requirements are affected by the new framework.
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