8 of total risk weighted assets calculated according to the applicable rules

8 of total risk weighted assets calculated according

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8% of total risk-weighted assets calculated according to the applicable rules for the calculation of capital adequacy ratio prior to the adoption of AMA; b. Add deductions from Tier 1 capital and Tier 2 capital; and c. Deduct operating reserve and loan loss provision that are eligible for inclusion in Tier 2 capital pursuant to the Regulations Governing the Capital Adequacy Ratio of Banks . 2. The adjusting factor for each year is as follows: 90% in the first year of implementation; 80% in the second year of implementation. 3. If the capital floor is higher than the result of following calculations, the difference thereof shall be multiplied by 12.5 and the result shall be included in the risk-weighted assets: a. 8% of total risk-weighted assets calculated according to the applicable rules for the calculation of capital adequacy ratio after the adoption of IRB approach; 214
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b. Add deductions from Tier 1 capital and Tier 2 capital; and c. Deduct operating reserve and loan loss provision that are eligible for inclusion in Tier 2 capital pursuant to the Regulations Governing the Capital Adequacy Ratio of Banks. (B) Basic requirements for management framework A bank’s use of the Standardized Approach requires the prior approval of the supervisory authority and the bank meeting the minimum criteria as follows: 1. The bank’s board of directors and senior management are actively involved in the oversight of the operational risk management; 2. The bank has a risk management system that is conceptually sound and is implemented with integrity; and 3. The bank has sufficient resources in the use of the approach in the major business lines as well as the control and audit areas. A bank’s AMA will be subject to a period of initial monitoring by the supervisory authority before it can be used for calculating regulatory capital, including whether the approach is credible and appropriate, whether the bank’s internal measurement system reasonably estimates unexpected losses based on the combined use of internal and relevant external loss data, scenario analysis and bank-specific business environment and internal control factors. The bank’s measurement system must also be capable of supporting an allocation of economic capital for operational risk across business lines in a manner that creates incentives to improve business line operational risk management. (C) Qualitative standards A bank that adopts the AMA for operational risk capital must meet the following qualitative standards: 1. The bank must have an independent operational risk management function that is responsible for the design and implementation of the bank’s operational risk management framework. The function is responsible for codifying firm-level policies and procedures concerning operational risk management and controls; for the design and implementation of the firm’s operational risk measurement methodology; for the design and implementation of a risk-reporting system for operational risk; and for developing strategies to identify, measure, monitor and control/mitigate operational risk.
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