Financial Markets Act, 2012 (Act No. 19 of 2012)RegulationsFinancial Markets Act RegulationsChapter VI : Central Counterparties25. Capital calculation requirements for operational risk25.2 Advanced measurement approach25.2.7 Business environment and internal control factors |
| (1) | A licensed central counterparty’s operational risk assessment methodology must be sufficiently robust to capture key business environment and internal control factors that may have an impact on the central counterparty’s operational risk profile, which factors must— |
| (a) | be a meaningful driver of risk based on the experience and involving the expert judgment of the affected business areas; and |
| (b) | as far as possible, be translatable into quantitative measures that lend themselves to verification. |
| (2) | A central counterparty’s estimates in respect of operational risk must be sufficiently sensitive to changes in the factors referred to in subregulation (1). |
| (3) | The relative weightings of the various factors referred to subregulation (1) must be appropriate, that is, the central counterparty’s risk framework must 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. |
| (4) | A licensed central counterparty’s operational risk framework and each instance of its application must be— |
| (a) | duly documented and subject to independent review; |
| (b) | validated through comparison to actual internal loss experience and relevant external data. |