Regulatory Alerts2015-01-01
Capital Adequacy Guideline: Measurement of Operational Risk 2015-01
The Central Bank of Barbados mandates all licensed financial institutions in the jurisdiction to calculate operational risk capital using either the Basic Indicator Approach or the Standardised Approach, with the Basic Indicator Approach serving as the default standard. The guideline establishes a fixed 15% alpha factor applied to a three-year rolling average of positive gross income for the Basic Indicator Approach, while the Standardised Approach requires licensees to allocate gross income across eight defined business lines and apply corresponding beta factors ranging from 12% to 18%. Institutions seeking to adopt the Standardised Approach must obtain prior supervisory approval, demonstrate robust operational risk management frameworks, and submit quarterly capital adequacy returns that convert calculated charges into equivalent assets.