Xchanging transaction bank receives BaFin approval for the use of AMA
28 Jan 2008
Frankfurt, 28 January 2008 – Since the beginning of the year, Xchanging transaction bank applies the Advanced Measurement Approach (AMA) for determining its operational risk. As one of five financial services providers, the securities processing specialist was authorised by the Federal Financial Supervisory Authority, Bafin (Bundesanstalt für Finanzdienstleistungsaufsicht), to use AMA. "By implementing the Advanced Measurement Approach, we can expand our management approach by another effective instrument and strengthen our position as efficient BPO company", Mike Margetts, Executive Director of Xchanging Financial Markets, says. "At the same time, we are setting a clear quality signal for our customer as the system requires continuous quality improvements."
With AMA, Xchanging transaction bank examines the actual risks of its business to calculate the regulatory capital requirements for operational risk - quite on the contrary to the other two applicable approaches (Basic Indicator Approach and Standardised Approach). AMA is based on a comprehensive catalogue of requirements for the management of operational risks. "The AMA calculation is based on an internal statistical model. Key parameters include loss data, the analysis of scenarios and Xchanging's insurance coverage," Mike Margetts explains. The implementation of AMA is complex and requires the installation of a risk management system. In order to use the Advanced Measurement Approach, internal losses have to be carefully recorded for a least five years. The Frankfurt-based financial service provider has collected any loss in a database since 1999.
Operational risk describes the risk of a bank to experience losses caused by failures of its internal processes and systems, human errors or external events that have an impact on the banking operations. The measurement approach used by Xchanging is based on the Solvency Regulation, the German translation of the Capital Requirement Directive (CRD) for the management of operational risk. The use of AMA is permitted only as of January 2008.
Xchanging is a fast-growing international, pure play business process outsourcing company providing complex industry specific processing to the banking and insurance industries such as securities processing and commercial insurance premiums and claims processing. We also provide procurement, finance and accounting, and human resources services to customers across industries.
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