Comments on the BCBS proposal for a New Standardized Approach for Operational Risk

On March 4th 2016 the Basel Committee on Banking Supervision published a consultative document where a new methodology, called the Standardized Measurement Approach (SMA), is introduced for computing Operational Risk regulatory capital for banks. In this note, the behavior of the SMA is studied under a variety of hypothetical and realistic conditions, showing that the simplicity of the new approach is very costly on other aspects: we find that the SMA does not respond appropriately to changes in...