114.This template provides information on the calculation of own funds requirements according to Articles 312 to 324 of CRR for Operational Risk under the Basic Indicator Approach (BIA), the Standardised Approach (TSA), the Alternative Standardised Approach (ASA) and the Advanced Measurement Approaches (AMA). An institution can not apply TSA and ASA for the business lines retail banking and commercial banking at the same time at solo level
115.Institutions using the BIA, TSA and/or ASA shall calculate their own funds requirement, based on the information at financial year end. When audited figures are not available, institutions may use business estimates. If audited figures are used, institutions shall report the audited figures which should remain unchanged. Deviations from this "unchanged" principle are possible, for instance if during that period the exceptional circumstances, such as recent acquisitions or disposals of entities or activities, are met.
116.If an institution can justify its competent authority that – due to exceptional circumstances such as a merger or a disposal of entities or activities – using a three year average to calculating the relevant indicator would lead to a biased estimation for the own funds requirement for operational risk,, the competent authority may permit the institution to modify the calculation in a way that would take into account such events. Also the competent authority may on its own initiative, require an institution to modify the calculation. Where an institution has been in operation for less than three years it may use forward looking business estimates in calculating the relevant indicator, provided that it starts using historical data as soon as they are available.
117.By columns, this template presents information, for the three most recent years, on the amount of the relevant indicator of the banking activities subject to operational risk and on the amount of loans and advances (the latter only applicable in the case of ASA). Next, information on the amount of own funds requirement for operational risk is reported. If applicable, it must be detailed which part of this amount is due to an allocation mechanism. Regarding AMA, memorandum items are added to present a detail of the effect of the expected loss, diversification and mitigation techniques on own funds requirement for operational risk.
118.By rows, information is presented by method of calculation of the operational risk own funds requirement detailing business lines for TSA and ASA.
119.This template shall be submitted by all institutions subject to operational risk own funds requirement.
Instructions concerning specific positions
010 - 030
RELEVANT INDICATOR Institutions using the relevant indicator to calculate the own funds requirement for operational risk (BIA, TSA and ASA) report relevant indicator for the respective years in columns 010 to 030. Moreover, in the case of a combined use of different approaches as referred in Article 314 of CRR, institutions also report, for information purposes, relevant indicator for the activities subject to AMA. It is also the case for all other AMA banks.
Hereafter, the term "relevant indicator" refers to "the sum of the elements" at the end of the financial year as defined in Article 316 point 1, Table1 of CRR.
If the institution has less than 3 years of data on “relevant indicator” available, the available historical data (audited figures) shall be assigned by priority to the corresponding columns in the table. If, for instance, historical data for only one year is available, it shall be reported in column 030. If it seems reasonable, the forward looking estimates shall then be included in column 020 (estimate of next year) and column 010 (estimate of year +2).
Furthermore if there are no historical data on "relevant indicator" available the institution may use forward-looking business estimates.
040 - 060
LOANS AND ADVANCES (IN THE CASE OF ASA APPLICATION) These columns shall be used to report the amounts of the loans and advances for business lines “Commercial banking” and “Retail banking”, as referred to in Article 319 (1) point (b) of CRR. These amounts shall be used to calculate the alternative relevant indicator that leads to the own funds requirements corresponding to the activities subject to ASA (Article 319 (1) point a) of CRR).
For the "commercial banking" business line, securities held in the non-trading book shall also be included.
OWN FUND REQUIREMENT The own fund requirement is calculated according to the approach used, following Articles 312 to 324 of CRR The resulting amount is reported in column 070.
TOTAL OPERATIONAL RISK EXPOSURE AMOUNT
Article 92 (4) of CRR. Own funds requirements in column 070 multiplied by 12.5.
OF WHICH: DUE TO AN ALLOCATION MECHANISM Article 18 (1) of CRR (related to the inclusion, in the application referred to in Article 312 (2) of CRR) of the methodology used for allocating operational risk capital between the different entities of the group and of whether and how diversification effects are intended to be factored in the risk measurement system used by a EU parent credit institution and its subsidiaries or jointly by the subsidiaries of an EU parent financial holding company or EU parent mixed financial holding company.
090 - 120
AMA MEMORANDUM ITEMS TO BE REPORTED IF APPLICABLE
OWN FUNDS REQUIREMENT BEFORE ALLEVIATION DUE TO EXPECTED LOSS, DIVERSIFICATION AND RISK MITIGATION TECHNIQUES The own funds requirement reported in column 090 is the one of column 070 but calculated before taking into account the alleviation effects due to expected loss, diversification and risk mitigation techniques (see below).
(-) ALLEVIATION OF OWN FUNDS REQUIREMENTS DUE TO THE EXPECTED LOSS CAPTURED IN BUSINESS PRACTICES In column 100 the alleviation of own funds requirements due to expected loss captured in internal business practices (as referred to in Article 322 (2) point a) of CRR) is reported.
(-) ALLEVIATION OF OWN FUNDS REQUIREMENTS DUE TO DIVERSIFICATION
The diversification effect in column 110 is the difference between the sum of own funds requirements calculated separately for each operational risk class (i.e. a “perfect dependence” situation) and the diversified own funds requirement calculated by taking into account correlations and dependencies (i.e. assuming less than “perfect dependence” between the risk classes). The “perfect dependence” situation occurs in the “default case”, that is when the institution does not use explicit correlations structure between the risk classes, hence the AMA capital is computed as the sum of the individual operational risk measures of the chosen risk classes. In this case the correlation between the risk classes is assumed of 100% and the value in the column has to be set to zero. Conversely, when the institution computes an explicit correlations structure between risk classes, it has to include in this column the difference between the AMA capital as stemming from the “default case” and that obtained after applying the correlations structure between the risk classes. The value reflects the “diversification capacity” of the AMA model, that is the ability of the model to capture the not simultaneous occurrence of severe operational risk loss events. In the column 110 the amount by which the assumed correlation structure decreases the AMA capital relative to the assumption of 100% correlation has to be reported.
(-) ALLEVIATION OF OWN FUNDS REQUIREMENT DUE TO RISK MITIGATION TECHNIQUES (INSURANCE AND OTHER RISK TRANSFER MECHANISMS) In column 120 the impact of insurance and other risk transfer mechanisms according to Article 323(1) to (5) of CRR is reported.
BANKING ACTIVITIES SUBJECT TO BASIC INDICATOR APPROACH (BIA) This row shall present the amounts corresponding to activities subject to the BIA to calculate the own funds requirement for operational risk (Articles 315 and 316 of CRR).
BANKING ACTIVITIES SUBJECT TO STANDARISED (TSA)/ ALTERNATIVE STANDARDISED (ASA) APPROACHES The own funds requirement calculated according to the TSA and ASA (Articles 317 to 319 of CRR) shall be reported.
030 - 100
SUBJECT TO TSA
In the case of using the TSA, relevant indicator for each respective year shall be distributed in rows 030 to 100 amongst the business lines defined in Article 317, Table 2 of CRR. The mapping of activities into business lines shall follow the principles described in Article 318 of CRR.
110 - 120
SUBJECT TO ASA
Institutions using the ASA (Article 319 of CRR) shall report for the respective years relevant indicator separately for each business line in the rows 030 to 050 and 080 to 100 and in the rows 110 and 120 for business lines "Commercial banking" and "Retail banking".
Rows 110 and 120 shall present the amount of relevant indicator of activities subject to ASA distinguishing between those corresponding to the business line “Commercial banking” and those corresponding to the business line “Retail banking” (Article 319 of CRR). There can be amounts for the rows corresponding to “Commercial banking” and “Retail banking” under the TSA (rows 060 and 070) as well as under the ASA rows 110 and 120 (e.g. if a subsidiary is subject to TSA whereas the parent entity is subject to ASA).
BANKING ACTIVITIES SUBJECT TO ADVANCED MEASUREMENT APPROACHES AMA The relevant data for AMA institutions (Article 312 point 2 and Article 321 to 323 of CRR) shall be reported.
In the case of combined use of different approaches as indicated in Article 314 of CRR, information on relevant indicator for activities subject to AMA shall be reported. It is also the case for all other AMA banks.