A licensed central counterparty that wishes to adopt the Advanced Measurement Approach for the calculation of its capital requirement in respect of operational risk must demonstrate to the satisfaction of the Authority that,—
| (a) | the central counterparty’s controlling body and senior management are actively involved in the oversight of its operational risk management framework; |
| (b) | the central counterparty’s operational risk management system is conceptually sound and implemented with integrity; |
| (c) | the central counterparty has sufficient resources for the use of the approach in its major business lines, and in the central counterparty’s control and audit units; |
| (d) | the central counterparty’s internal measurement system is able to reasonably estimate unexpected losses based on the combined use of— |
| (ii) | relevant external loss data; |
| (iii) | scenario analysis; and |
| (iv) | the central counterparty’s internal control factors and the business environment in which the central counterparty operates; |
| (e) | the central counterparty’s internal measurement system is capable of supporting the allocation of economic capital for operational risk across business lines in such a manner that incentives are created to improve the risk management capabilities in each relevant business line; |
| (f) | the central counterparty complies with the qualitative and quantitative standards specified in Regulation 25.2.2 and 25.2.3; |
| (g) | the central counterparty has in place a credible, transparent, well-documented and verifiable approach for weighting the fundamental elements as specified in paragraph (d) in its overall operational risk measurement system, and in all cases the central counterparty’s approach for weighting these four fundamental elements must be internally consistent and avoid double counting of qualitative assessments or risk mitigants already recognised in other elements. |
