ERM Glossary: Advanced measurement approach (AMA)

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In Basel II/III, the advanced measurement approach (AMA) (for operational risk) allows firms to calculate the operational risk regulatory capital charge using the bank’s internal operational risk measurement modelling system. Firms doing so can use their own internal models that must be pre-approved by supervisors. Their calculations need to involve:


(a)    Collection of data on their operational risk losses;

(b)   Combination of this data with external data; and

(c)    Use of key risk indicators and self-assessments.


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