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4 May 2001
The second tranche of the Basel Committee on
Banking Supervision's Quantitative Impact Study is attached. This
tranche of the study is intended to allow the Committee to develop a
calibration of the operational risk charge, and hence assess with
greater accuracy the overall impact of the proposed New Basel Capital
Accord, by collecting actual operational loss data. The data
requested will also assist the Committee in calibrating the Basic
Indicator and Standardised Approaches for assessing regulatory
operational risk capital. A draft of the second tranche was circulated
for comment during April, and the Committee is grateful to the numerous
banks, insurance companies and supervisors who provided responses.
Some basic information on operational risk was requested in the first
tranche of the QIS survey. Banks should not delay the submission
of that information, which should be provided with the rest of the first
tranche of QIS data by 1 June. The Committee is aware that the
completion of the QIS within the deadline has created a burden for
banks. For this reason it has staggered the two tranches of the survey,
and the operational risk data requested in tranche 2 should be submitted
to national supervisors by 1 August 2001.
The attached paper and spreadsheet set out a format for submitting
loss data. This format is based on 8 standard business lines and 7
level 1 loss event categories (which in turn are subdivided into 21
level two loss event categories). Guidance on the composition of the
business lines and loss event categories is provided. For working
purposes the Committee has also set out a series of loss effect
categories. These are intended to allow banks to assess fully the
impact of operational loss events in their P&L attributions. The
survey also requests information on the other components of the Internal
Measurement Approach formula.
The survey is intended to allow the consolidation of industry wide
data on a consistent and comparable basis. The Committee is aware that
at present there is no industry standard loss classification and
measurement system for operational risk and it is clear that even those
banks with well established reporting systems will need to map their
existing data to present it in the format requested. Furthermore, banks
without loss databases are unlikely to be able to collect and present
data in the timescale available for this exercise. Nevertheless, the
Committee urges all banks to review the survey and consider whether they
might establish mechanisms to collect such data in future. The
Committee will be conducting further data exercises on operational risk
next year, based on this survey format and hopes that it will lay the
foundations for improved data capture and reporting by banks, and hence
more accurate calibration of the operational risk charge going forward.
The process of completing the survey should help banks prepare for the
implementation of the operational risk element of the New Basel Capital
Accord in 2004.
It is important that banks complete the survey using the definitions
provided. Where banks' definitions do not correspond to those in the
survey, they should map them to those provided in the attached document.
Banks that submit results that do not attempt to follow the definitions
and the mappings provided in the survey will have to be discarded from
the sample. In addition, banks submitting loss data also need to
provide the related information on exposure indicators and scaling so
that the loss information to be aggregated with the results submitted by
other institutions.
The Committee appreciates that this exercise is lengthy and detailed.
It believes, however, that its proposals will have increased accuracy
and risk sensitivity where they are based on a sound quantitative
foundation. The data requested is of fundamental importance to the
development of the operational risk charge and the calibration of the
overall capital framework, and to the extent that more accurate and
complete data is received then the need for buffers or adjustments for
uncertainty is reduced.
All data that is received will be treated as confidential. The
Committee intends to provide feedback to the industry on the results of
the survey. This will be done on a basis that avoids any disclosure of
individual bank data.
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