Foreign banks trading in the UK through permanent establishments: The approach in determining an adjustment to funding costs - STEP 2: Risk weighting the assets - the Basel II regulatory regime: Pillar 1 - the alternative standardised approach to
If it meets certain criteria a bank which derives 90% or more of its income from retail and/or commercial banking may receive Financial Services Authority (FSA) authorisation to use the Alternative Standardised Approach to operational risk.
The relevant indictors under this approach are the same as for The Standardised Approach (TSA) except for two business lines: retail banking and commercial banking. For these lines the operational risk capital requirement is calculated as a normalised income indicator equal to the three year average of the total nominal amount of loans and advances multiplied by:
- 0.035, and then
- the appropriate business line percentage shown above.