UK Basel 3.1: Operational risk - standardised approach
On 12 December 2023, the Prudential Regulation Authority (PRA) published near-final rules on the implementation of Basel 3.1 standards through Policy Statement 17/23 (PS17/23) which offers feedback on the responses received for Consultation Paper 16/22 (CP16/22) published on 30 November 2022.
The implementation date of these changes as part of Basel 3.1 standards is January 1, 2026, as outlined in PS9/24.
A summary of the key changes to the calculation of operational risk own funds requirement is provided below.
Key change: All existing operational risk approaches [Basic Indicator Approach (BIA), Standardised Approach (SA), and Advanced Measurement Approach (AMA)] are replaced by the new Standardised Approach (SA) for operational risk.
A summary of the new approach is given below (SA):
Table 1: The following table outlines the Business Indicator range and associated marginal coefficient:
Note 1: Items to be included in the calculation of each BI element are given below:
Items to be included in ILDC:
Items to be included in SC:
Items to be included in FC:
Items excluded from the BI calculation:
