MORNBFI Vol. 1 - Planters Development Bank

gross income over the previous three (3)years of positive annual gross income.Figures for any year in which annual grossincome is negative or zero should beexcluded from both the numerator anddenominator when calculating the average.5. Banks that have the capability tomap their income accounts into the variousbusiness lines given in paragraph 7 may usethe standardized approach subject to priorBSP approval 1 . In order to qualify for use ofthe standardized approach, a bank mustsatisfy BSP that, at a minimum:a) Its board of directors and seniormanagement are actively involved in theoversight of the operational riskmanagement framework;b) It has an operational risk managementsystem that is conceptually sound and isAPP. Q-4611.12.31implemented with integrity; andc) It has sufficient resources in the useof the approach in the major business linesas well as the control and audit areas.6. Operational risk capital charge iscalculated as the three (3)-year average ofthe simple summation of the regulatorycapital charges across each of the businesslines in each year. In any given year, negativecapital charges (resulting from negativegross income) in any business line may offsetpositive capital charges in other businesslines without limit. However, where theaggregate capital charge across all businesslines within a given year is negative, thenfigures for that year shall be excluded fromboth the numerator and denominator.7. The business lines and theircorresponding beta factors are listed below:Business lines Activity Groups Beta factorsLevel 1 Level 2Corporate Finance Mergers and acquisitions, underwriting, 18%Corporate financeMunicipal/Govern- privatizations, securitization, research, debtment Finance (government, high yield), equity, syndications, IPO,Advisory Services secondary private placementsSales Fixed income, equity, foreign exchanges, 18%Market Making commodities, credit, funding, own position securities,Trading and Sales Proprietary lending and repos, brokerage, debt, prime brokeragePositionsTreasuryRetail Banking Retail lending and deposits, banking services, trust 12%and estatesRetail BankingPrivate Banking Private lending and deposits, banking services,trust and estates, investment adviceCard Services Merchant/commercial/corporate cards, privatelabels and retailCommercial Commercial Project finance, real estate, export finance, trade 15%Banking Banking finance, factoring, leasing, lending, guarantees,bills of exchangePayment and External Clients Payments and collections, funds transfer, clearing 18%Settlement and settlementCustody Escrow, depository receipts, securities lending 15%Agency Services(customers) corporate actionsCorporate Agency Issuer and paying agentsCorporate TrustDiscretionary Fund Discretionary and non-discretionary fund 12%Asset ManagementManagement management, whether pooled, segregated, retail,Non-Discretionary institutional, closed, open, private equityFund ManagementRetail Brokerage Retail brokerage Execution and full service 12%Manual of Regulations for Non-Bank Financial InstitutionsQ RegulationsAppendix Q-46 - Page 371Refer to Appendix Q-46b for the Guidelines on the Use of the Standardized Approach in Computing the Capital Charge forOperational Risk