Reduced form of the standard approach for operational risk for economic capital assessment
Reduced form of the standard approach for operational risk for economic capital assessment

Summary/Abstract: The paper addresses the construction of the standard approach for calculation of the operational risk. We present procedure for the modification of the business lines charges and composition for operational risk assessment to be applied for economic capital assessment. The method is based on the identification of the scope of activities and their returns on equity together with grouping the activities to business lines. We propose the application of the factorial analysis for the business line identification. The empirical testing was performed on the Polish broker-dealers market. A sample consists of 34 entities and represents 62% of the market in terms of number of entities. The financial statements for periods ended 2010 and 2009 were taken into consideration. The total financial statements included in the sample were 84 yearly observations.

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