Basel IV: approach for determining the capital charges

The Basel Committee on Banking Supervision (BCBS) has finalized the Standardized Approach (SMA) for calculating the capital charges for operational risk. Compared to the consultation paper, the approach has mainly stayed the same: the SMA consists of the two components Business Indicator Component (BIC) and Internal Loss Multiplier (ILM for short), which are multiplied by each other.

Read the entire article here for more information on the approach, the impact on capital and the resulting need for action.