This chapter contains guidance to help a firm understand the FCA's expectations on the extent to which the Advanced Measurement Approach (AMA) should capture its operational risks where the firm has, or is about to, implement AMA.

This is relevant where the AMA is applied across only part of a firm's operations and is used in conjunction with either the Basic Indicator Approach (BIA), or the Standardised Approach (TSA).

A firm may use an AMA in combination with the BIA or TSA, provided it obtains permission from the FCA. In granting such permission, the FCA is required by article 314(3) of the UK CRR1 (Combined use of different approaches) to impose the following conditions when the AMA is used in combination with BIA or TSA:

1. (1)

   on the date of first implementation of the AMA, a 'significant' part of the institution's operational risk are captured by that approach; and

2. (2)

   the institution to commit to apply the AMA across a 'material' part of its operations within a time schedule approved by the FCA.

For the purposes of these conditions, the FCA considers that:

1. (1)

   a "significant" part of operational risk shall be approximately 50% (or more); and

2. (2)

   a 'material' part of its operations shall be around 85% (or more).