IBANK 7.4.4 Standardised approach—calculation

(1) An Islamic banking business firm must use the standardised approach to operational risk. Operational risk capital requirement is the amount of capital that the firm must have to cover its operational risk.
(2) The standardised approach is based on the following factors:
(a) the business indicator (BI), which is a financial-statement-based proxy for operational risk;
(b) the business indicator component (BIC), which is calculated by multiplying the BI by a set of marginal coefficients;
(c) the internal loss multiplier (ILM), which is a scaling factor that is based on a firm’s average historical losses and the BIC.
(3) The business indicator is the sum of:
(a) the profit, ijarah instalments and dividend component (PIDC);
(b) the services component (SC): and
(c) the financial component (FC);
where PIDC, SC and FC are calculated as set out in rule 7.4.5.
Derived from QFCRA RM/2020-3 (as from 1st January 2021)