Skip to content
Subscriber Only

Banks' Hands Tied as Basel Tightens Rules on Operational Risk

  • Global regulator set to scrap internal models for assessment
  • Basel's Ingves says rules `relatively neutral' on capital
Updated on

Banks’ options for gauging the risk of incurring losses from events such as fraud, cybercrime and litigation are set to shrink as the Basel Committee on Banking Supervisiontries to stop firms gaming the rules.

The global regulator, whose members include the U.S. Federal Reserve and the People’s Bank of China, proposed scrapping an “unduly complex” internal model-based method for calculating so-called operational risk, which “has resulted in excessive variability in risk-weighted assets and insufficient levels of capital for some banks.” Instead, the Basel committee proposed a single standardized method for risk assessment.