1.2.1. Process

Credit institutions shall calculate their capital requirement as comprising both expected loss and unexpected loss, unless they can demonstrate that expected loss is adequately captured in their internal business practices. The operational risk measure must capture potentially severe tail events, achieving a soundness standard comparable to a 99,9 % confidence interval over a one year period. The operational risk measurement system of a credit institution must have certain key elements to meet the soundness standard set out in point 8. These elements must include the use of internal data, external data, scenario analysis and factors reflecting the business environment and internal control systems as set out in points 13 to 24. A credit institution needs to have a well documented approach for weighting the use of these four elements in its overall operational risk measurement system. The risk measurement system shall capture the major drivers of risk affecting the shape of the tail of the loss estimates. Correlations in operational risk losses across individual operational risk estimates may be recognised only if credit institutions can demonstrate to the satisfaction of the competent authorities that their systems for measuring correlations are sound, implemented with integrity, and take into account the uncertainty surrounding any such correlation estimates, particularly in periods of stress. The credit institution must validate its correlation assumptions using appropriate quantitative and qualitative techniques. The risk measurement system shall be internally consistent and shall avoid the multiple counting of qualitative assessments or risk mitigation techniques recognised in other areas of the capital adequacy framework.

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Source: EUR-Lex (Cellar) · retrieved 2026-10-09 · Text as adopted (Official Journal); later amendments are not incorporated in this text.