On 4 March 2016 the Basel Committee on Banking Supervision (BCBS) proposed a new Standardised Measurement Approach (SMA) for Pillar 1 operational risk capital. It proposed that the SMA replaces all existing basic, standardised and advanced approaches for calculating operational risk capital requirements. This tracker summarises plans for SMA implementation by jurisdiction.
The finalised guidance – published in December 2017 – offered national discretion on:

The use of loss data

The use of loss data for small banks

A higher threshold for which losses are included
The BCBS’ stated aim was achieve an appropriate balance between simplicity, comparability, and risk sensitivity for operational risk capital calculations. It also expected the revisions to have a relatively neutral impact on capital.
We've previously done a number of detailed studies to assess the effect of the SMA on the industry, including a study on the capital impact of the SMA which is freely available for you to read. We've also carried out a number of research projects for our members – including the capital benchmarking survey.
ORX has also published a lessons learnt paper which has analysed the direction of travel of regulatory implementation around loss data quality, focusing on Canada where loss history has been included in the capital calculation.
As different regulatory bodies share their plans for Basel III, we'll update this page with information about their decisions and highlighting key areas of difference. If you have any updates please send them to john.bosnell@orx.org
We will also have a standing item at the Banking Definitions Working Group looking at different national regulator requirements and guidance for the Internal Loss Multiplier component for Basel III SMA, if the regulator is not setting the loss multiplier = 1.
The BCBS also publishes a progress report on the implementation of the Basel regulatory framework. The October 2024 press release has the latest detail on implementation in 27 jurisdictions and the European Union.
Summary of SMA implementation by jurisdiction
Jurisdiction |
Implementation timeline for operational risk capital |
Loss History included |
Loss data for smaller institutions |
Australia (APRA) |
1 January 2023 |
No |
Not applicable |
Brazil (BCB) |
1 January 2025 |
Yes |
No, under consultation |
Canada (OSFI) |
1 February 2023 |
Yes |
Only if approved for Standardised Approach |
Europe (EBA) |
1 January 2025 |
No |
|
India (RBI) |
Not confirmed |
Yes |
No for firms with BI of less than INR 80 billion |
Japan (FSA) |
31 March 2024 (Internationally active) 31 March 2025 |
Yes |
No |
Singapore (MAS) |
1 July 2024 |
Yes |
Optional for firms with a BI of less than SGD 1.5 billion |
South Africa (SARB) |
1 July 2025 |
Yes, under consultation |
No, under consultation |
Switzerland (FINMA) |
1 January 2025 |
Yes |
Unconfirmed |
United Kingdom (PRA) |
1 January 2027 |
No |
No |
United States (Fed) |
Not confirmed |
No, under consultation |
No, under consultation |
Summary of differences in implementation and capital impact
Status: Confirmed, 12 June 2019
Loss history included: No
Loss data for smaller institutions: No
Loss threshold: N/A
Implementation timeline: 1 January 2023
Find out more
- APRA finalises new bank capital framework designed to strengthen financial system resilience
- APRA announces deferral of capital reform implementation
Status: Confirmed, November 2023.
Loss history included: Yes
Loss data for smaller institutions: No, or under guidance of the BCB for segment 3 banks (Segment 4 & 5 banks don’t include ILM)
Loss threshold: R$500,000 (~€77,950)
Implementation timeline: 1 January 2025
Comment
The BCB segments/buckets banks into segments based on the ratio of the total exposure of a financial institution compared to the Brazilian GDP as follows:
- Segment 1:
exposure >= 10% of GDP or relevant international activity
(ILM calculated) - Segment 2:
exposure < 10% and >= 1% of GDP
(ILM calculated) - Segment 3:
exposure < 1% and >= 0.1% of GDP
(ILM = 1 OR ILM calculated subject to the prior authorisation of the BCB) - Segment 4:
exposure < 0.1% of GDP
(ILM = 1, no loss history)
Find out more
Status: Confirmed, 2 July 2019. Implementation pushed back from January 2023 to January 2025 to allow firms to focus on managing risks stemming from the Covid pandemic
Loss history included: No
Loss data for smaller institutions: No
Loss threshold: Supervisors' discretion
Implementation timeline: 1 January 2025
Comment
Will require banks to systematically identify, disclose and manage Environmental, Social and Governance (ESG) risks, including climate stress testing.
Find out more
- Proposed Capital Requirements Regulation (CRR 3) for Basel III, see page 105 for calculation of the own funds requirement for operational risk pp 109-114 for loss data collection requirements
Status: Confirmed, 2 July 2019. Implementation pushed back from January 2023 to January 2025 to allow firms to focus on managing risks stemming from the Covid pandemic
Loss history included: No
Loss data for smaller institutions: No
Loss threshold: Supervisors' discretion
Implementation timeline: 1 January 2025
Comment
Will require banks to systematically identify, disclose and manage Environmental, Social and Governance (ESG) risks, including climate stress testing.
Find out more
- Proposed Capital Requirements Regulation (CRR 3) for Basel III, see page 105 for calculation of the own funds requirement for operational risk pp 109-114 for loss data collection requirements
Status: Requirements issued, timeline for implementation not yet available
Loss history included: Yes
Loss data for smaller institutions: ILM=1 for firms with Business Indicator = INR 80 billion (approx. USD 1 billion)
Loss threshold: Not specified
Implementation timeline: Not specified
Find out more
Master Direction on Minimum Capital Requirements for Operational Risk (June 2023)
Status: Confirmed and implemented, 28 April 2022
Loss history included: Yes
Loss data for smaller institutions: No (< ¥1 billion (~€6 million))
Loss threshold: Yes, ¥2 million (~€12 thousand)
Implementation timeline: 31 March 2024 (internationally active banks), 31 March 2025 (non-internationally active bank).
Comment
The JFSA has gone ahead with the implementation of Basel III, even as other countries are holding back.
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- Currently no English translation exists of the FSA regulation
Status: Confirmed
Loss history included: Yes
Loss data for smaller institutions: Banks with a business indicator under SGD 1.5 billion can use loss data or set ILM=1. All firms are required to disclose loss history
Loss threshold: Losses equal to or over S$150,000 should be included in loss history
Implementation timeline: 1 July 2024
Comment
Response to Consultation Feedback (December 2020)
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Status: Confirmed, 2021
Loss history included: Latest proposal suggests yes for banks with a business indicator greater than or equal to ZAR5 billion
Loss data for smaller institutions: Latest proposal suggests no for banks with a business indicator under ZAR5 billion
Loss threshold: Not specified
Implementation timeline: 1 July 2025
Comment
Consultation took place with SA banks in H1 2024
Find out more
Status: Confirmed, 2022
Loss history included: Yes
Loss data for smaller institutions: Not specified
Loss threshold: Losses over CHF 25,000 should be included in loss history
Implementation timeline: 1 January 2025
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Status: Confirmed, 2021
Loss history included: No
Loss data for smaller institutions: the PRA considers that Basel 3.1 would be appropriate for all firms
Loss threshold: Not specified
Implementation timeline: 1 January 2027
Comment
Reasons given by the PRA for setting the ILM=1 are:
- The calculation of the ILM is non-linear – operational risk capital requirements increase more slowly as historical losses increase. The PRA considers that, particularly for situations of large historical losses, more flexible and risk-sensitive approaches are appropriate, including the PRA’s Pillar 2A methodology.
- Calculating capital requirements for operational risk is a significant challenge. The loss distribution is unusually ‘fat-tailed’, characterised by infrequent but very large losses, and there is a paucity of data. The PRA considers that low-probability high-impact events, given their heterogeneity, are generally not good predictors of other unlikely events and therefore future losses. In these situations, the ILM may not be sufficiently risk-sensitive.
- The PRA considers that the information value of operational risk losses generally diminishes over time as business models and lending activities change. The SA’s use of a 10-year window of unweighted past losses in the ILM could result in it being inappropriately affected by large historical operational risk losses near the start of the 10-year period that might be weak predictors of future losses.
See CP16/22, section 8.24
Find out more
- Bank of England – CP16/22 – Implementation of the Basel 3.1 standards: Operational Risk (30 November 2022)
- PS17/23 – Implementation of the Basel 3.1 standards near-final part 1
- The PRA announces a delay to the implementation of Basel 3.1
Status: Re-proposal issued by Vice Chair for Supervision Barr in September 2024
Loss history included: No, under consultation
Loss data for smaller institutions: No, under consultation
Loss threshold: Not specified
Implementation timeline: Phased transition during 2025-28
Comment
September 2024 re-proposal suggests no longer adjusting a firm’s operational risk charge based on its operational loss history. Explicit requirement to capture descriptive information about loss events greater than USD 20,000.
Find out more
- The Next Steps on Capital
- Basel III Endgame – Federal Reserve Board Meeting 27 July 2023
- FED speech outlines a path forward for the Basel III endgame