U-turn on SMA comparability sparks anger
The Basel Committee’s retreat on a risk sensitive standardised approach for operational risk capital has some market practitioners despairing, although others spy an opportunity for national regulators to spark a revival in more intuitive op risk calculation methodologies
This article is the second in a series focusing on proposed reforms of the operational risk capital framework; the first can be found here.
Simplicity, comparability, risk sensitivity. The Basel Committee on Banking Supervision identified these three principles as the foundations of its standardised measurement approach (SMA) for operational risk capital when it was first unveiled in March 2016. Yet fast forward a year, and all three appear to have been jettisoned in the pursuit of a compromise
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