PREPAREDNESS OF BANKS TO BE COMPLIANT WITH THE CRITERIA FOR THE ADVANCED MEASUREMENT APPROACH: A SOUTH AFRICAN PERSPECTIVE

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Jacobus Young ORCID logo

https://doi.org/10.22495/cocv8i2sip4

Abstract

The New Basel Accord proposed qualitative and quantitative criteria for banks to use the Advanced Measurement Approach to calculate a capital charge for operational risk. The question now is how prepared are banks in South Africa? This article provides insight into relevant criteria, indicating the level of preparedness of banks for the Advanced Measurement Approach. An analysis based on results of a questionnaire, aimed at junior and middle management levels, indicated that banks are more compliant with qualitative than quantitative criteria. It also indicated a general lack of understanding of certain criteria. Should a bank want to implement the Advanced Measurement Approach, it is imperative that criteria be clear and that all role-players be knowledgeable about relevant systems and processes.

Keywords: Operational Risk, Capital Allocation, Risk Management Principles, Advanced Measurement Approach, Regulatory Capital, Quantitative and Qualitative Risk Management Criteria

How to cite this paper: Young, J. (2011). Preparedness of banks to be compliant with the criteria for the advanced measurement approach: A South African perspective [Special issue]. Corporate Ownership & Control, 8(2), 44-53. https://doi.org/10.22495/cocv8i2sip4