Banks Act, 1990 (Act No. 94 of 1990)

Regulations

Regulations relating to Banks

Chapter II : Financial, Risk-based and other related Returns and Instructions, Directives and Interpretations relating to the completion thereof

33. Operational risk: six-monthly return

Directives and interpretations for completion of six-monthly return concerning operational risk (Form BA 400)

Subregulation (9) Advanced measurement approach

Subregulation (9)(d) Qualifying criteria

Subregulation (9)(d)(viii) Business environment and internal control factors
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(viii)Business environment and internal control factors

 

As a minimum—

(A)a bank's operational risk assessment methodology shall be sufficiently robust to capture key business environment and internal control factors that may have an impact on the bank's operational risk profile, which factors—
(i)shall be a meaningful driver of risk based on the experience and involving the expert judgment of the affected business areas;
(ii)as far as possible, shall be translatable into quantitative measures that lend themselves to verification;
(B)a bank's estimates in respect of operational risk shall be sufficiently sensitive to changes in the factors referred to in item (A) above;
(C)the relative weightings of the various factors referred to in item (A) above shall be appropriate, that is, the bank's risk framework shall be able to capture potential increases in risk due to greater complexity of activities or increased business volume, or changes in risk due to improvements in risk controls;
(D)a bank's operational risk framework and each instance of its application—
(i)shall be duly documented and subject to independent review;
(ii)shall be validated through comparison to actual internal loss experience and relevant external data.