Standardised approach to operational Risk (STA)

In the Basel II Accord it is the intermediate of the three approaches of the BIS to operational risk. The approach represents the intermediate level; at that level banks' activities are divided into standardised business units and eight defined business lines. Within each business line, there is a specified broad indicator that reflects the size or volume of banks' activities in that area. The capital charge is in each line calculated by multiplying the indicator by a capital factor (denoted "beta") assigned to that business line. Regulatory capital requirements are calculated by taking a three-year average of gross income for business lines. Each of these eight income measures are then multiplied by a given risk weight (between 12 and 18 per cent) and then summed together to arrive at an overall capital requirement.