First, with respect to operational-loss data, Basel II banks face the challenge of establishing credible operational-loss databases that they can use in determining their regulatory capital requirement for operational risk. The advanced approaches under Basel II create a link between regulatory capital and risk management.
Banks using an AMA for operational risk will be required to adopt more-formal, quantitative risk-measurement and risk-management procedures and processes. For example, Basel II establishes standards for data collection and the systematic use of the information collected. These standards are consistent with broader supervisory expectations that high-quality risk management at large complex organizations depends on credible data--and not just for Basel II.