Advanced Measurement Approach (AMA)

The most sophisticated of the three approaches available for financial institutions for calculating the capital requirements for operational risk under the New Basel Accord. Under AMA, the internal operational risk models of the institutions will be able to provide internal loss data for capital calculations and will generate the regulatory capital requirements. These models will need to meet set quantative and qualitative criteria. In order to use this approach the institutions will need to demonstrate compliance with increasingly exacting operational risk management standards.