DBOD.BP.BC. 14054/21.06.001/2009-10
February 11, 2010
The Chairman and Managing Directors/
Chief Executive Officers of
All Commercial Banks
Dear Sir
Implementation of The Standardised Approach (TSA) for
Calculation of Capital Charge for Operational Risk- Draft Guidelines
Please refer to our circular DBOD BP. BC. 23/21.06.001/2009-10 dated July 7,
2009, inter alia advising banks that they can apply for migrating to The
Standardised Approach and Alternative Standardised Approach (ASA) for
Operational Risk from April 1, 2010 onwards.
- The guidelines on TSA/ASA, largely based on BCBS document, ‘International
Convergence of Capital Measurement and Capital Standards’ a revised framework
comprehensive version, June 2006 (Basel II), are furnished in the Annex.
- The basic methodology of calculation of capital charge for operational risk
remains the same as in case of Basic Indicator Approach in as much as the
exposure indicator for operational risk continues to be Gross Income. However,
in TSA there is a requirement of mapping the activities of a bank into eight
business lines as indicated in Appendix 1 of the guidelines. In addition, banks
also have to meet minimum standards for management of operational risk including
capturing of operational loss data for individual business lines as indicated in
the guidelines.
- The banks interested in migrating to TSA/ASA for operational risk capital may
approach RBI (DBOD) with a formal application after March 31, 2010, with a write
up in support of their compliance with the provisions of the guidelines
furnished in the Annex. It may be reiterated that banks would have the
discretion to adopt TSA/ASA, while continuing with simpler approaches for
computation of capital for credit and market risks.
Yours faithfully
(B. Mahapatra)
Chief General Manager