The capital requirement of a licensed central counterparty that adopted the Advanced Measurement Approach for the measurement of the central counterparty’s exposure to operational risk must be—
| (a) | equal to the sum of the central counterparty’s expected loss amounts and unexpected loss amounts, unless the central counterparty can demonstrate to the satisfaction of the Authority that the central counterparty duly measures and accounts for expected losses; |
| (b) | equal to the aggregate amount of the central counterparty’s risk measures for the different operational risk estimates, provided that, subject to the prior written approval of, and such conditions as may be specified in writing by the Authority, the central counterparty may use internally determined correlations in respect of operational risk losses across individual operational risk estimates, provided that— |
| (i) | the central counterparty’s systems must— |
| (aa) | take into account uncertainty in respect of correlation estimates; |
| (bb) | be subject to sufficiently robust stress testing. |
| (ii) | the central counterparty must validate its correlation assumptions by making use of appropriate quantitative and qualitative techniques; |
| (c) | the amount after the central counterparty has taken into account the effect of eligible risk mitigation, that is, in order to take into account the effect of risk mitigation in respect of operational risk, the central counterparty must comply with the relevant requirements relating to risk mitigation specified in Regulation 25.2.9. |
