PIB A6.1.1

(1) An Authorised Firm which uses the Basic Indicator Approach must calculate its Operational Risk Capital Requirement equal to the average over the previous three years of a fixed percentage (denoted alpha) of positive annual gross income.
(2) In (1), if the figure for annual gross income in any of the previous three years is zero or negative an Authorised Firm must exclude such amounts from the calculation of the average.
(3) The Operational Risk Capital Requirement in (1) must be calculated according to the following formula:

KBIA = [Σ(GI1...n Xα)] / n


KKIA = the Operational Risk Capital Requirement under the Basic Indicator Approach

GI = the gross annual income, where positive, over the previous three years

n = number of the previous three years for which gross income is positive

α = 15%,
(4) For the purpose of (1), "gross income" is net interest income plus net non-interest income and must:
(a) be gross of any provisions (e.g. for unpaid interest);
(b) be gross of operating expenses, including fees paid to outsourcing service providers;
(c) exclude realised profits/losses from the sale of Securities in the Non-Trading Book; and
(d) exclude extraordinary or irregular items as well as income derived from insurance recoveries.
Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]