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Implementation of The Standardised Approach (TSA) for Calculation of Capital Charge for Operational Risk- Draft Guidelines


 Notice Date : 11 February 2010

Implementation of The Standardised Approach (TSA) for Calculation of Capital Charge for Operational Risk- Draft Guidelines

DBOD.BP.BC. 14054/21.06.001/2009-10

February 11, 2010

The Chairman and Managing Directors/
Chief Executive Officers of
All Commercial Banks

Dear Sir

Implementation of The Standardised Approach (TSA) for
Calculation of Capital Charge for Operational Risk- Draft Guidelines

Please refer to our circular DBOD BP. BC. 23/21.06.001/2009-10 dated July 7, 2009, inter alia advising banks that they can apply for migrating to The Standardised Approach and Alternative Standardised Approach (ASA) for Operational Risk from April 1, 2010 onwards.

2. The guidelines on TSA/ASA, largely based on BCBS document, ‘International Convergence of Capital Measurement and Capital Standards’ a revised framework comprehensive version, June 2006 (Basel II), are furnished in the Annex.

3. The basic methodology of calculation of capital charge for operational risk remains the same as in case of Basic Indicator Approach in as much as the exposure indicator for operational risk continues to be Gross Income. However, in TSA there is a requirement of mapping the activities of a bank into eight business lines as indicated in Appendix 1 of the guidelines. In addition, banks also have to meet minimum standards for management of operational risk including capturing of operational loss data for individual business lines as indicated in the guidelines.

4. The banks interested in migrating to TSA/ASA for operational risk capital may approach RBI (DBOD) with a formal application after March 31, 2010, with a write up in support of their compliance with the provisions of the guidelines furnished in the Annex. It may be reiterated that banks would have the discretion to adopt TSA/ASA, while continuing with simpler approaches for computation of capital for credit and market risks.

Yours faithfully

(B. Mahapatra)
Chief General Manager

 

 

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on 12 February 2010
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