Banks' hands tied as Basel tightens rules
Basel Committee on Banking Supervision may scrap an unduly complex internal model-based method for calculating so-called operational risk
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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 Supervision tries to stop firms from gaming the rules.
The global regulator, whose members include the US 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 standardised method for risk assessment.
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