PIB A6.3.4 Guidance
1. For the purposes of the
Alternative Standardised Approach, total loans and advances in the retail banking business line consist of the total drawn amounts in the following credit portfolios: retail, SMEs treated as retail, and purchased retail receivables.
2. For commercial banking, total loans and advances consist of the drawn amounts in the following credit portfolios: corporate, sovereign, bank, specialised lending, SMEs treated as corporate and purchased corporate receivables. The book value of securities held in the
Non-Trading Book should also be included.
3. The three year average should be calculated on the basis of the last three yearly observations at the end of the
Authorised Firm's financial year. When audited figures are not available, business estimates may be used.
4. If an
Authorised Firm does not have sufficient income data to meet the three year requirement (e.g. a start-up) it may use its forecasted gross income projections for all or part of the three year time period.
5. In accordance with PIB Rule 6.11.3 of
PIB, an Authorised Firm seeking to apply the Standardised Approach or the Alternative Standardised Approach must develop specific policies and have documented criteria for mapping gross income for current business lines and activities into the Standardised Approach or the Alternative Standardised Approach. The criteria must be reviewed and adjusted for new or changing business activities as appropriate. The principles for business line mapping are set out below.
6. All activities should be mapped into the eight level 1 business lines in a mutually exclusive and jointly exhaustive manner.
7. Any activity which cannot be readily mapped into the business line framework, but which represents an ancillary function to an activity included in the framework, should be allocated to the business line it supports. If more than one business line is supported through the ancillary activity, an objective mapping criteria should be used.
8. When mapping gross income, if an activity cannot be mapped into a particular business line then the business line yielding the highest charge should be used. The same business line equally applies to any associated ancillary activity.
Authorised Firm may use internal pricing methods to allocate gross income between business lines, provided that total gross income for the firm (as would be recorded under the Basic Indicator Approach) still equals the sum of gross income for the eight business lines.
10. The mapping of activities into business lines for
Operational Risk capital purposes should be consistent with the definitions of business lines used for regulatory capital calculations in other risk categories, i.e. credit and Market Risk. Any deviations from this principle should be clearly motivated and documented.
11. The mapping process used should be clearly documented. In particular, written business line definitions should be clear and detailed enough to allow third parties to replicate the business line mapping. Documentation should, among other things, clearly motivate any exceptions or overrides and be kept on record.
12. Processes should be in place to define the mapping of any new activities or products and the mapping process to business lines should be subject to independent review.
Table — Mapping of Business Lines
|Level 1||Level 2||
|Corporate Finance||Corporate Finance||Mergers and acquisitions, underwriting, privatisations, securitisation, research, debt (government, high yield), equity, syndications, IPO, secondary private placements.|
|Trading and Sales||Sales||Fixed income, equity, foreign exchanges, commodities, credit, funding, own position securities, lending and repos, brokerage, debt, prime brokerage.|
||Retail lending and deposits, banking services, trust and estates.|
||Private lending and deposits, banking services, trust and estates, investment advice.|
|Card Services||Merchant/commercial/corporat e cards, private labels and retail.|
||Project finance, real estate, export finance, trade finance, factoring, leasing, lending, guarantees, bills of exchange.|
|Payment and Settlement||
Payments and collections, funds transfer, clearing and Settlement.
Note: Payment and settlement losses related to an
|Agency Services||Custody||Escrow, depository receipts, securities lending (customers) corporate actions.|
Pooled, segregated, retail, institutional, closed, open, private
||Pooled, segregated, retail, institutional, closed, open.|
|Retail Brokerage||Retail Brokerage||
Derived from RM111/2012 (Made 15th October 2012). [VER20/12-12]