The '''basic approach''' or '''basic indicator approach''' is a set of operational risk measurement techniques proposed under [[Basel II]] capital adequacy rules for banking institutions.
Basel II requires all banking institutions to set aside capital for [[Operationaloperational Riskrisk]]. Basic Indicatorindicator Approachapproach is much simpler compared to the alternative approaches (i.e. [[Standardizedstandardized Approachapproach (Operationaloperational Riskrisk)]] and [[Advancedadvanced Measurementmeasurement Approachapproach]]) and this has been recommended for banks without significant international operations.
Based on the original Basel Accord, banks using the Basicbasic Indicatorindicator Approachapproach must hold capital for operational risk equal to the average over the previous three years of a fixed percentage of positive annual gross income. Figures for any year in which annual gross income is negative or zero should be excluded from both the numerator and denominator when calculating the average.
