Entire Section

  • PIB A6.2 PIB A6.2 Standardised Approach

    • PIB A6.2.1

      An Authorised Firm which uses the Standardised Approach:

      (a) must calculate its Operational Risk Capital Requirement equal to the average annual gross income over the previous three years for each of the business lines in PIB Rule A6.2.3 multiplied by the fixed percentage (denoted beta) in PIB Rule A6.2.3;
      (b) subject to (c), may in any given year offset negative a Capital Requirement (resulting from negative gross income) in any business line against positive capital charges in other business lines without limit; and
      (c) must input to the numerator a value of zero if the aggregate Operational Risk Capital Requirement across all business lines within a given year is negative.
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB A6.2.2

      An Authorised Firm which uses the Standardised Approach must calculate its Operational Risk Capital Requirement according to the following formula:

      KSA = {Σ years 1–3 max[Σ(GI 1–8X B1–8) , 0]}/ 3

      where:

      KSA = the capital charge under the Standardised Approach

      GI1–8 = annual gross income in a given year, as defined above in the Basic Indicator Approach, for each of the eight business lines

      B1–8 = a fixed percentage set out in PIB Rule A6.2.3.

      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

    • PIB A6.2.3 PIB A6.2.3

      An Authorised Firm which uses the Standardised Approach must calculate its Operational Risk Capital Requirement using the following beta values:

      Business Line Beta Factor
      Corporate finance 18%
      Trading and sales 18%
      Retail banking 12%
      Commercial banking 15%
      Payment and settlement 18%
      Agency services 15%
      Asset management 12%
      Retail brokerage 12%
      Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]

      • PIB A6.2.3 Guidance

        The gross income is measured for each business line, not the whole institution, i.e. in corporate finance, the indicator is the gross income generated in the corporate finance business line.

        Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]