Art. 314 (5) CRR III states that: “Subject to the prior permission of the competent authority, and to the extent that the institutional protection scheme has at its disposal suitable and uniformly stipulated systems for the monitoring and classification of operational risks, institutions that are members of an institutional protection scheme meeting the requirements of Article 113(7) may calculate the services component net of any income received from, or expenses paid to, institutions that are members of the same institutional protection scheme. Any losses resulting from the related operational risks are subject to mutualisation across institutional protection scheme members.”

In the article above, it is not clear how to interpret the word “any” in the first and second sentence, when referring respectively to the net of income received from, or expenses paid to, institutions that are members of the same IPS, and to the losses subject to mutualisation across IPS members.

In case “any income received from, or expenses paid to” in the first sentence refers to all income and expenses, this would imply that losses, expenses, provisions, and other financial impacts from operational risk events (the main contributor of the Other Operating Expenses), would be deducted from the Services Component, hence they would not contribute to the BI and to the regulatory capital on operational risk. 

In case “any losses resulting from the related operational risks” in the last sentence refers to all the operational risk losses, the institution protection scheme should mutualise losses of any size from other institution protection scheme members.  A full mutualisation of losses should not be the expectation here, since the existence of a complete mutualisation of any losses resulting from the related operational risks could be considered as a moral hazard potentially reducing the institution's incentive to manage risks responsibly.