Accounting issue:

  • “General criteria for loss data identification, collection and treatment” (BCBS, December 2017) providing economic capital accounting data complementing the Business Indicator (BI) for OPE - Calculation of RWA for Operational Risk.

A/ OPE25 Standardized Approach effective as of 01 Jan 2023 is based on the following components:

(1) the Business Indicator (BI) which is a financial-statement-based proxy for operational risk.

(2) the Business Indicator Component (BIC), which is calculated by multiplying the BI by a set of regulatory determined marginal coefficients (αi); and

(3) the Internal Loss Multiplier (ILM), which is a scaling factor that is based on a bank’s average historical losses and the BIC.

B/ Supervisor cross-cutting management requirements

  • Supervisors generally expect the risk appetite framework to be fully integrated in its decision-making processes and risk management, and aligned with the bank ́s business plan, strategy, capital planning and employee remuneration practices. All supervisors require that an entity's risk appetite cover all the material risks to which it is exposed (BCBS, June 2019).

C/ To achieve this simply connect to FinTech SAF -V1 and FinTech SAF -V2.

 Contrary to market risk, operational risk management is not based, as was believed until the subprime crisis, on the decision-making tool or stochastic calculus used by the actuary. Since the analyst (Auditor or Actuary) is responsible for the calculations and not for the approval, the OPE25 and the laws in force now place this responsibility on the CEO and the Board:

  • BCBS, June 2019 and OPE25, effective as of 01 Jan 2023.
  • European Directive article 9a of May 17, 2017.
  • SEC Non-GAAP Financial Measures of April 4, 2018.