Different Approaches to Regulatory Capital Calculation for Operational Risk

Changes in operational risk environment caused by globalization, information technology development and deregulations, have been significantly influencing banking industry and operational risk management process. This continuous evolution has forced to create an appropriate regulatory framework. Starting from Basel I Accord where market and credit risk were controlled, Basel II regulatory framework introduced an operational risk category and capital requirements for the losses connected with operational risk. The problem has raised during and after the financial crisis, when despite an increase in the number and severity of operational risk events, capital requirements for operational risk remained stable or even fell for the standardized approaches. As a consequence, the new Standardized Approach was proposed in 2015 and implemented by most biggest banks. The aim of the paper is to compare different approaches proposed under Basel II for modeling operational risk and to discuss new Basel IV proposals of regulatory capital charge for the operational risk.