Basic indicator approach: Difference between revisions

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Revision as of 04:02, 2 October 2017

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Based on the original Basel Accord, banks using the basic indicator approach 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. A standard deviation is commonly also taken.

The fixed percentage ‘alpha’'alpha' is typically 15 percent of annual gross income.

==See also==

*[[Standardized approach (operational risk)]]

*[[Advanced measurement approach]]

*[[Basel II]]

*[[Capital Requirements Directive]]

*[[Operational risk]]

*[[Reputational risk]]

*[[Standardized approach (operational risk)]]

*[[Basel II]]

==References==