Key facts
- The Basel Committee on Banking Supervision finalized the bulk of the Basel III framework in 2017.
- Complaints are growing that the operational risk charge is too crude to incentivize good measurement and management of individual risk types.
The operational risk charge within the Basel capital framework has been a subject of growing criticism. While a major objective of the framework has been to encourage better measurement and management of various risk types, the current approach to operational risk is seen by some as too blunt. Banks are reportedly finding the charge too simplistic to effectively incentivize granular risk management practices.