Realised profits/losses from the sale of non-trading book items;
Income from extraordinary or irregular items;
Income derived from insurance.
When revaluation of trading items is part of the profit and loss statement, revaluation could be included. When Article 36 (2) of Directive 86/635/EEC is applied, revaluation booked in the profit and loss account should be included.
Textual Amendments
| Business line | List of activities | Percentage |
|---|---|---|
| Corporate finance | Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis Services related to underwriting Investment advice Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to the mergers and the purchase of undertakings Investment research and financial analysis and other forms of general recommendation relating to transactions in financial instruments | 18 % |
| Trading and sales | Dealing on own account Money broking Reception and transmission of orders in relation to one or more financial instruments Execution of orders on behalf of clients Placing of financial instruments without a firm commitment basis Operation of Multilateral Trading Facilities | 18 % |
| Retail brokerage (Activities with a individual physical persons or with small and medium sized entities meeting the criteria set out in Article 79 for the retail exposure class) | Reception and transmission of orders in relation to one or more financial instruments Execution of orders on behalf of clients Placing of financial instruments without a firm commitment basis | 12 % |
| Commercial banking | Acceptance of deposits and other repayable funds Lending Financial leasing Guarantees and commitments | 15 % |
| Retail banking (Activities with a individual physical persons or with small and medium sized entities meeting the criteria set out in Article 79 for the retail exposure class) | Acceptance of deposits and other repayable funds Lending Financial leasing Guarantees and commitments | 12 % |
| Payment and settlement | Money transmission services, Issuing and administering means of payment | 18 % |
| Agency services | Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management | 15 % |
| Asset management | Portfolio management Managing of UCITS Other forms of asset management | 12 % |
all activities must be mapped into the business lines in a mutually exclusive and jointly exhaustive manner;
any activity which cannot be readily mapped into the business line framework, but which represents an ancillary function to an activity included in the framework, must be allocated to the business line it supports. If more than one business line is supported through the ancillary activity, an objective-mapping criterion must be used;
if an activity cannot be mapped into a particular business line then the business line yielding the highest percentage must be used. The same business line equally applies to any associated ancillary activity;
credit institutions may use internal pricing methods to allocate the relevant indicator between business lines. Costs generated in one business line which are imputable to a different business line may be reallocated to the business line to which they pertain, for instance by using a treatment based on internal transfer costs between the two business lines;
the mapping of activities into business lines for operational risk capital purposes must be consistent with the categories used for credit and market risks;
senior management is responsible for the mapping policy under the control of the governing bodies of the credit institution; and
the mapping process to business lines must be subject to independent review.
Credit institutions shall have a well-documented assessment and management system for operational risk with clear responsibilities assigned for this system. They shall identify their exposures to operational risk and track relevant operational risk data, including material loss data. This system shall be subject to regular independent review.
The operational risk assessment system must be closely integrated into the risk management processes of the credit institution. Its output must be an integral Part of the process of monitoring and controlling the credit institution's operational risk profile.
Credit institutions shall implement a system of management reporting that provides operational risk reports to relevant functions within the credit institution. Credit institutions shall have procedures for taking appropriate action according to the information within the management reports.
verifying that the internal validation processes are operating in a satisfactory manner;
making sure that data flows and processes associated with the risk measurement system are transparent and accessible.
the insurance policy must have an initial term of no less than one year. For policies with a residual term of less than one year, the credit institution must make appropriate haircuts reflecting the declining residual term of the policy, up to a full 100 % haircut for policies with a residual term of 90 days or less;
the insurance policy has a minimum notice period for cancellation of the contract of 90 days;
the insurance policy has no exclusions or limitations triggered by supervisory actions or, in the case of a failed credit institution, that preclude the credit institution receiver or liquidator, from recovering for damages suffered or expenses incurred by the credit institution, except in respect of events occurring after the initiation of receivership or liquidation proceedings in respect of the credit institution; provided that the insurance policy may exclude any fine, penalty, or punitive damages resulting from actions by the competent authorities;
the risk mitigation calculations must reflect the insurance coverage in a manner that is transparent in its relationship to, and consistent with, the actual likelihood and impact of loss used in the overall determination of operational risk capital;
the insurance is provided by a third party entity. In the case of insurance through captives and affiliates, the exposure has to be laid off to an independent third party entity, for example through re-insurance, that meets the eligibility criteria; and
the framework for recognising insurance is well reasoned and documented.
the residual term of an insurance policy, where less than one year, as noted above;
a policy's cancellation terms, where less than one year; and
the uncertainty of payment as well as mismatches in coverage of insurance policies.
all operational risks of the credit institution are captured. The competent authority shall be satisfied with the methodology used to cover different activities, geographical locations, legal structures or other relevant divisions determined on an internal basis; and
the qualifying criteria set out in Parts 2 and 3 are fulfilled for the Part of activities covered by the Standardised Approach and Advanced Measurement Approaches respectively.
on the date of implementation of an Advanced Measurement Approach, a significant part of the credit institution's operational risks are captured by the Advanced Measurement Approach; and
the credit institution takes a commitment to roll out the Advanced Measurement Approach across a material Part of its operations within a time schedule agreed with its competent authorities.
| Event-Type Category | Definition |
|---|---|
| Internal fraud | Losses due to acts of a type intended to defraud, misappropriate property or circumvent regulations, the law or company policy, excluding diversity/discrimination events, which involves at least one internal party |
| External fraud | Losses due to acts of a type intended to defraud, misappropriate property or circumvent the law, by a third party |
| Employment Practices and Workplace Safety | Losses arising from acts inconsistent with employment, health or safety laws or agreements, from payment of personal injury claims, or from diversity/discrimination events |
| Clients, Products & Business Practices | Losses arising from an unintentional or negligent failure to meet a professional obligation to specific clients (including fiduciary and suitability requirements), or from the nature or design of a product |
| Damage to Physical Assets | Losses arising from loss or damage to physical assets from natural disaster or other events |
| Business disruption and system failures | Losses arising from disruption of business or system failures |
| Execution, Delivery & Process Management | Losses from failed transaction processing or process management, from relations with trade counterparties and vendors |