These RTS will be part of the Single Rulebook aimed at enhancing regulatory harmonisation in the banking sector in the European Union. In particular, they specify the qualitative and quantitative requirements which institutions are to meet before they can be granted permission to use AMA internal models to calculate their capital requirements to cover operational risk.
In addition, these RTS clarify the scope of operational risk, as well as the scope of operational risk loss, and specify common standards for the supervisory assessment of a bank's operational risk governance with respect to the role and responsibilities of the operational risk management function and the reporting system.
These RTS also lay down criteria for the supervisory assessment of the key methodological components of the operational risk measurement system. They ensure this methodology effectively captures banks' actual and potential operational risk, is reliable and robust in generating AMA regulatory capital requirements and is comparable across institutions.
Finally, these RTS establish criteria for the supervisory assessment of banks' data quality and IT systems, requirements and terms for the 'use test‘ and terms and the scope of audit and internal validation of the AMA framework.
These RTS are part of the overall review of internal models undertaken by the EBA and represent another step forward in harmonising practices for the approval of internal models. Similar mandates exist in regard to credit and market risk internal models.
The consultation runs until 12 September 2014. All contributions received will be published following the close of the consultation, unless requested otherwise. A public hearing will take place at the EBA premises on 15 July 2014 from 15:00 to 17:00 hours UK time.
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