Response to consultation on draft Regulatory Technical Standards on assessment methodologies for the Advanced Measurement Approaches for operational risk
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To mandate such a change has significant ramifications for all EU institutions who already have an AMA model and or are in the process of developing an AMA model (with the exception of any institution that has already adopted this choice). It creates inconsistency with non-EU jurisdictions. Its inclusion in the RTS is inappropriate.
We believe the regulation Article 322 (3) (b) that allows an institution to choose its approach to setting the modelling and thus measurement of risk boundary between the calculation of own funds requirements for Credit risk (Title II Capital Requirements for Credit Risk (Articles 107 – 191) and Operational risk (Tile III) should remain.
Therefore, we do not support the phase-in approach.
Q2: Do you support the treatment under an AMA regulatory capital of fraud events in the credit area, as envisaged in Article 6? Do you support the phase-in approach for its implementation as set out in Article 48?
The EBA propose to mandate that fraud risk must be modelled in an AMA model. We reject completely this proposal. We do not support the proposals.To mandate such a change has significant ramifications for all EU institutions who already have an AMA model and or are in the process of developing an AMA model (with the exception of any institution that has already adopted this choice). It creates inconsistency with non-EU jurisdictions. Its inclusion in the RTS is inappropriate.
We believe the regulation Article 322 (3) (b) that allows an institution to choose its approach to setting the modelling and thus measurement of risk boundary between the calculation of own funds requirements for Credit risk (Title II Capital Requirements for Credit Risk (Articles 107 – 191) and Operational risk (Tile III) should remain.
Therefore, we do not support the phase-in approach.
Q3: Do you support the collection of ’opportunity costs/loss revenues‘ and internal costs at least for managerial purposes, as envisaged in Article 7(2)?
Yes for management. But no if it implies mandatory modelling within AMA as the RTS implies. There are many challenges in collecting the data and modelling it. Institutions should be permitted to decide these matters themselves, subject to internal governance and review by competent authorities as set out in Chapter VII of the draft RTS.Q4: Do you support the items in the lists of operational risk events in Articles 4, 5 and 6, and the items in the list of operational risk loss in Article 7? Or should more items be included in any of these lists?
No. The Articles on Legal (4) and Market (5) and Operational Risks (7 & 8) need to be revised. We reject completely the proposals set out in Article 6 with respect to Fraud Risk.Q5. Do you support that the dependence structure between operational risk events cannot be based on Gaussian or Normal-like distributions, as envisaged in Article 26 (3)? If not, how could it be ensured that correlations and dependencies are well-captured?
No. We do not support the exclusion of certain distributions and even copulas. We believe that the RTS has the potential to stifle modelling. The draft RTS is far too prescriptive with respect to the identification of probability distributions and the determination of aggregated loss distributions and risk measures.Q6: Do you support the use of the operational risk measurement system not only for the calculation of the AMA regulatory capital but also for the purposes of internal capital adequacy assessment, as envisaged in Article (42)(d)?
Yes. However, the EBA need to bear in mind that an institution may have a different confidence interval to 99.90% for internal capital adequacy.Upload files
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