The Committee of European Banking Supervisors (CEBS) has today published a Consultation Paper on the Guidelines on AMA changes with the aim of assisting institutions using the Advanced Measurement Approach (AMA) to further develop their AMA models.
Article 105 Par. 1 of Directive 2006/48/EC and Article 20 Par 1 of Directive 2006/49/EC allow institutions and investment firms (hereinafter, institution(s)) to use, within the Advanced Measurement Approach (AMA), their internal risk models to determine the regulatory capital charge for operational risk, provided these internal models are expressly approved by the competent Authorities.
An AMA should, at all times, be tailored to the specific characteristics of the institutions, so that their actual operational risk profile is effectively covered. Therefore, institutions are obliged to regularly review the AMA and, if needed, to revise it according to the changes in internal and external factors. Institutions may also wish to extend the AMA to new components for which approval has not been granted.
Both AMA extensions and changes may have a considerable impact on the quality and reliability of the AMA framework and on the level of regulatory capital for operational risk. The present Guidelines provide institutions with guidance on how to communicate AMA extensions and changes to the competent authorities and on how to define internal policies for AMA changes in line with supervisory expectations. Supervisors will review the AMA change policies and ultimately approve or object to any proposed change or extension.
CEBS submits its initial views for a three-month public consultation which starts today and runs until 15 March 2011. Comments received will be published on CEBS’s website unless respondents request otherwise. Please send your comments to the following email address: firstname.lastname@example.org
A public hearing will be held on 23 February 2011 at CEBS’s premises in London, from 10:00 to 13:00 to allow all interested parties to share their views with CEBS.
CEBS expects its members to implement the Guidelines on AMA changes by 31 December 2011. After that date, members should ensure that institutions comply with them effectively.