Asset and Liability Management: The Banker’s Guide to Value Creation and Risk Control, Second Edition

Standardized approach

This is simple. The capital charge is simply a multiple of the gross revenue of an activity, averaged over the last three years. With reference to Stage 3, gross revenue is the sum of net interest margin and non-interest income (such as fees).

Business lines	Beta factors
Corporate finance	18%
Trading and sales	18%
Retail banking	12%
Commercial banking	15%
Payment and settlements	18%
Agency services	15%
Asset management	12%
Retail brokerage	12%

Capital ≥ beta factor × average gross income of last 3 years.

For example, in the case of retail banking, this is calculated as follows:

Capital_Retail ≥ 12% × average gross income of last 3 years.

Again, the risk-weighted asset for operational risk is equal to:

RWA_{operational risk} = capital × 12.5 ...