OM-8.1.1

Section CA-7.1 of the Capital Adequacy Module allows banks to use either the basic indicator approach or standardised approach to compute capital charge for operational risk. This chapter sets out the qualitative aspect of these two approaches.

OM-8.1.2

Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk¹, but excludes strategic and reputational risk.

1 Legal risk includes, but is not limited to, exposure to fines, penalties, or punitive damages resulting from supervisory actions, as well as private settlements.