Determining operational capital at riskan empirical application to the retail banking

  1. Enrique Jiménez-Rodríguez
  2. José Luis Martín Marín
Documentos de Trabajo FUNCAS

ISSN: 1988-8767

Year of publication: 2009

Issue: 441

Type: Working paper

More publications in: Documentos de Trabajo FUNCAS


In this paper, we conduct an empirical application of the Advanced Measurement Approach (AMA), in particular the Loss Distribution Approach (LDA), to the Spanish retail banking sector for the estimation of Economic Capital for Operational Risk. Our results confirm that the implementation of such advanced approach in credit entities provides a lower consumption of regulatory capital, in comparison with the non-advanced methodologies, such us the Basic Indicator Approach (BIA) and the Standardised Approach (SA). At the same time, by focussing on the LDA model, we also assess the potential impact on the Capital at Risk (CaR) of the probability distribution parametric profile used when modelling the internal operational losses, recorded by the financial entity in its IOLD (Internal Operational Losses Database).