DBOD.No.BP.1365/21.04.118/2004-05
March 11, 2005
To
The Chairman
All Scheduled Commercial Banks
Dear Sir,
Draft Guidance Note on Management of Operational
Risk
The draft guidelines on implementation of the
New Capital Adequacy Framework were issued for comments on February 15, 2005.
In terms of our draft guidelines banks are required to maintain capital for
operational risk as per the Basic Indicator Approach and are required to comply
with the Basel Committee’s guidance on Sound Practices for the Management
and Supervision of Operational Risk, February 2003. Many banks, both formally
and informally, desired that the Reserve Bank issue a guidance note on management
of operational risk on the lines of guidance notes issued by the Reserve Bank
on management of credit risk and market risk in 2002.
2. Accordingly, a Working Group comprising of
senior officials from select banks was constituted to draw up a draft Guidance
Note on Management of Operational Risk. On the basis of inputs received from
the Working Group draft Guidance
Note on Management of Operational Risk has been prepared and is enclosed.
The Guidance Note has drawn upon and reflects the international best practices
in the area of operational risk management. Banks are requested to furnish their
feedback to us within one month from the date of this letter. The draft Guidance
Note is also placed on the web-site for wider access and feedback. The Guidance
Note would be reviewed and revised in the light of the feedback that may be
received
4. Please acknowledge receipt
Yours faithfully,
(C. R. Muralidharan)
Chief General Manager-in-Charge
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