Erscheinung:03.12.2008 | Topic Own funds OpR Expert Group recommendation on the partial use of the Basic Indicator Approach (BIA) and the Standardised Approach (TSA) (of 31.10.2007)
Preliminary remark
In its mandate the OpR Expert Group set itself the task of drawing up proposals for how the latitude that exists in the national implementation of the Basel and Brussels rules on operational risk might be utilised. The following Expert Group recommendation is a suggestion for regulating the simultaneous use of the Basic Indicator Approach and the Standardised Approach in determining the capital requirement for operational risk. The recommendation is subject to its being consistent with the decisions taken at the European level.
Please note:German version is binding
This translation is furnished for information purposes only and may refer to an older version of the text. The original German text is binding in all respects.
Section 277 of the Solvency Ordinance (as of 01.01.2007)
Combined use with the Basic Indicator Approach
(1) It shall not be possible to combine the Standardised Approach with the Basic Indicator Approach except in the cases specified under subsection (2).
(2) 1In well founded exceptional circumstances BaFin may, upon application, permit partial use of the Standardised Approach along with the Basic Indicator Approach for a transitional period. 2Authorisation for this transitional combined use shall be conditional upon a commitment by the institution concerned to use the Standardised Approach to determine the total capital charge for operational risk in the foreseeable future.
Explanatory comments (as of 31.10.2007)
Exceptional events such as, for example, mergers or the acquisition of individual institutions may cause a group of institutions to use a BIA alongside an TSA or to use both the aforementioned approaches temporarily alongside an AMA without this already having been approved in the AMA roll-out plan. The TSA must also be introduced in the entities that have been acquired within an appropriate period. The timetable for the introduction of the TSA in the entities that have been acquired must be submitted to BaFin. If an institution plans to introduce an AMA, the implementation plan must be updated and then rolled out once it has been approved by BaFin.
If the TSA is being used together with the BIA on a transitional basis at the group level, the qualitative standards for the TSA must be met only for that part of the group of institutions in which the TSA is used.
The OpR Expert Group has already published further explanatory comments on the Standardised Approach in its Recommendation on the qualitative standards in the Standardised Approach. In particular, an institution which uses the Standardised Approach at the individual level may permanently draw on the resources of the group of institutions in order to meet the qualitative requirements for the Standardised Approach. If a group of institutions as defined by section 10a of the Banking Act (Kreditwesengesetz – KWG) uses the TSA and the Basic Indicator Approach is used at the individual institution level, meeting the qualitative standards for the TSA at the group level is sufficient.
