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Industry Files Comment Letter on Standardized Measurement Approach to Operational Risk


Sean Oblack

New York, NY – June 6, 2016 – The Clearing House Association, along with the Securities Industry and Financial Markets Association and the Financial Services Roundtable, last Friday submitted a comment letter to the Basel Committee on Banking Supervision in response to its consultative document on the Standardised Measurement Approach to Operational Risk.  In the letter, the associations affirmed their support for the proposed withdrawal of the Advanced Measurement Approach framework.  The letter also offered recommendations on changes that would make the proposed standardized measurement approach more risk-sensitive and reflective of the current banking operational risk environment.

“A standardized approach to operational risk is appropriate, and the core methodology here is sound; however, we are concerned that flaws remain that would result in an insufficiently risk-sensitive methodology for determining banks’ operational risk capital requirements,” said Brett Waxman, Managing Director at The Clearing House.

The letter provided recommendations necessary to avoid banks from being required to hold capital based on size and historical experience, rather than against operational risk, since the historical experience may not indicate the current operational risk profile of the bank.  The letter suggested that the proposed approach’s loss component be revised to account for business model changes, and encouraged the Basel Committee to regularly perform quantitative impact studies and recalibrate the framework as necessary.

About The Clearing House.  The Clearing House is a banking association and payments company that is owned by the largest commercial banks and dates back to 1853.  The Clearing House Payments Company L.L.C. owns and operates core payments system infrastructure in the United States and is currently working to modernize that infrastructure by building a new, ubiquitous, real-time payment system.  The Payments Company is the only private-sector ACH and wire operator in the United States, clearing and settling nearly $2 trillion in U.S. dollar payments each day, representing half of all commercial ACH and wire volume.  Its affiliate, The Clearing House Association L.L.C., is a nonpartisan organization that engages in research, analysis, advocacy and litigation focused on financial regulation that supports a safe, sound and competitive banking system.  

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