Final draft RTS on the assessment methodology to authorize the use of AMA

European Banking Authority

The EBA has published final RTS setting out quantitative and qualitative requirements under which the competent authorities may permit institutions to use the AMA for the calculation of own funds requirements for operational risk.

The CRR allows competent authorities to permit the use Advanced Measurement Approaches (AMA) for the calculation of own funds requirements for operational risk to those entities that meet certain quantitative and qualitative requirements. In this regard, the CRR contains a mandate addressed to the EBA to specify the assessment methodology under which the competent authorities may permit institutions to use the AMA.

To carry out this mandate, the EBA has published final RTS specifying the qualitative and quantitative requirements that shall be considered by competent authorities, which will replace the former guidelines published by the CEBS.

These RTS are aimed at ensuring that the operational risk measurement systems are based on a well-founded methodology, are effective in capturing institutions’ actual and potential operational risk, are reliable and robust in generating AMA regulatory capital requirements and are comparable across institutions.

The following is an analysis of the requirements that shall be considered by competent authorities under the RTS of the EBA.

Executive summary

The document published by the EBA is divided into three main sections: scope of operational risk, qualitative standards and quantitative standards.

Scope of application

  • The RTS are addressed to competent authorities. Institutions that are likely to obtain an approval authorization for the use of AMA are those within the scope of application of the CRR.

Regulatory context

  • Directive 2013/36/EU (CRD IV) and  Regulation 575/2013 (CRR).
  • “Guidelines on the scope of operational risk and operational risk loss”, CEBS.
  • “Operational Risk – Supervisory Guidelines for the  Advanced Measurement Approaches”, BCBS

Download the technical note by clicking here.