SARB issued a Directive (D6/2020) on the completion and submission of return for operational risk for banks. The Directive specifies that banks, controlling companies, and branches of foreign institutions are required to submit to the Prudential Authority the quarterly form BA 410. The form must be submitted 20 working days after each relevant quarter-end on a bank solo basis and 30 working days after each relevant quarter-end on a bank consolidated and controlling company consolidated basis. The Directive D6/2020 replaces Directive 11 of 2013 and Directive 5 of 2018.
Form BA 410 is intended to obtain selected information for, among other things, the bank’s loss event types, recorded gross losses, and recovery of losses, based on specified business lines and loss event types. Regulation 34(2) of the Regulations relating to Banks sets out the purpose of the form BA 410 for a bank that adopted the advanced measurement approach (AMA) for the calculation of its minimum required amount of capital and reserve funds in respect of operational risk. In addition, as part of its supervisory processes, the Prudential Authority also requested banks that adopted the standardized approach (TSA) and the alternative standardized approach (ASA) for the calculation of its required amount of capital and reserve funds in respect of operational risk to complete and submit the form BA 410.
In accordance with the provisions of regulation 34(3) of the Regulations relating to items 1 to 63, banks must apply a minimum gross loss threshold amount of ZAR 10,000 for reporting purposes. Only losses that fall within the definition of operational risk losses specified in the Regulations, excluding credit boundary events, must be recorded and reported on the Form BA 410. In accordance with the provisions of regulation 34(3) of the Regulations relating to items 64 to 75, banks must apply a gross loss threshold amount of ZAR 5 million for reporting material operational risk losses. Banks may, after consultation with the Prudential Authority, use a lower threshold should they so wish.
Related Link: D6/2020 (PDF)
Keywords: Middle East and Africa, South Africa, Banking, Operational Risk, Reporting, D6/2020, BA 410, SARB
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