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Qualitative Standard for Operational Risk Management System (ORMS)

Qualitative Standard for Operational Risk Management System (ORMS) :

A bank should have techniques for allocating operational risk capital to business lines, among various legal entities and across the banking group for creating incentives to improve the management of operational risk, processes and practices throughout the bank. The bank should be able to demonstrate that the allocation will enhance transparency, risk awareness and operational risk management expertise in the bank.

Advance Measurement Approach (AMA) banking groups should continue efforts to develop increasingly risk-sensitive operational risk allocation techniques, notwithstanding initial approval of techniques based on gross income or other proxies for operational risk. The appropriateness of the allocation methodology will be reviewed with consideration given to the stage of development of risk-sensitive allocation techniques and the extent to which it reflects the level of operational risk in the legal entities and across the banking group.

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