INTM267741 - Foreign banks trading in the UK through permanent establishments: 皇冠体育app approach in determining an adjustment to funding costs - STEP 2: Risk weighting the assets - the Basel II regulatory regime: Pillar 1 - operational risk - HMRC internal manual

INTM267741 - Foreign banks trading in the UK through permanent establishments: 皇冠体育app approach in determining an adjustment to funding costs - STEP 2: Risk weighting the assets - the Basel II regulatory regime: Pillar 1 - operational risk

皇冠体育app requirement to hold capital to support operational risk losses is entirely new and is covered at 鈥淧rudential sourcebook for Banks, Building Societies and Investment Firms鈥� (BIPRU) 6. 皇冠体育app definition of operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events including legal risk. Banks are allowed to choose one of three different approaches to the process of risk weighting:

皇冠体育app Basic Indicator Approach (BIA)
皇冠体育app Standardised Approach (TSA)
皇冠体育app Advanced Management Approach (AMA)

Pillar 2 is where the true extent of operational risk is assessed.

皇冠体育app Bank of International Settlements (BIS) considers that operational risk with the potential for substantial losses may arise from:

Internal fraud
External fraud
Employee practices and workplace safety
Clients, products and business practices
Damage to physical assets
Business disruption and systems failure
Execution, delivery and process management

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