3. Definitions
| No: 44047144 | Date(g): 27/12/2022 | Date(h): 4/6/1444 |
Effective from Jan 01 2023 - Dec 31 2022
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| The following terms and phrases used in this document shall have the corresponding meanings unless otherwise stated: | |
| Operational risk | the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This definition includes legal risk but excludes strategic and reputational risk. |
| Legal risk | includes, but is not limited to, exposure to fines, penalties, or punitive damages resulting from supervisory actions, as well as private settlements. |
| The standardized approach methodology components | |
| (1) the Business Indicator (BI) | a financial-statement-based proxy for operational risk; |
| (2) the Business Indicator Component (BIC) | calculated by multiplying the BI by a set of regulatory determined marginal coefficients or percentages; and |
| (3) the Internal Loss Multiplier (ILM) | a scaling factor that is based on a bank’s average historical losses and the BIC. |
| Gross loss | a loss before recoveries of any type. |
| Net loss | the loss after taking into account the impact of recoveries. |
| Recovery | an independent occurrence, related to the original loss event, separate in time, in which funds or inflows of economic benefits are received from a third party1. |
1 Examples of recoveries are payments received from insurers, repayments received from perpetrators of fraud, and recoveries of misdirected transfers.