These draft RTS detail the assessment methodology to be used by Competent Authorities for operational risk AMA models. In particular, they specify the qualitative and quantitative criteria that institutions are to meet before they can be granted permission to use AMA internal models for calculating their capital requirements to cover operational risk. Through periodic reviews and material model extensions, Competent Authorities shall also assess that institutions maintain the prescribed requirements through time.
These RTS also lay down criteria for the supervisory assessment of the key methodological components of the operational risk measurement system. They ensure this methodology effectively captures banks' actual and potential operational risk, is reliable and robust in generating AMA regulatory capital requirements and is comparable across institutions.
In addition, these RTS provide common standards for the supervisory assessment of a bank's operational risk governance with respect to the role and responsibilities of the operational risk management function and the reporting system and establish criteria for the supervisory assessment of banks' data quality and IT systems, the requirements and terms for an institution to use its AMA in the running of its business (‘use test') and the terms and the scope of audit and internal validation of the AMA framework.
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