7.1 The Standardized Approach

Effective from Dec 28 2022 - Dec 27 2022
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The Banks must calculate minimum ORC requirements based on the Standardized Approach by multiplying the BIC and the ILM:
ORC = BIC x ILM
Where-
	(a)	Business Indicator Component (BIC) is calculated as the sum of:
		(i)	12% of the Bank’s BI;
		(ii)	if the Bank’s BI exceeds SAR 4.46 billion, 3% of the amount by which the BI exceeds SAR 4.46 billion; and
		(iii)	if the Bank’s BI exceeds SAR 133.8 billion, 3% of the amount by which the BI exceeds SAR 133.8 billion;²
BI is elaborated in section 7.2
	(b)	Internal Loss Multiplier (ILM) is calculated as follow:

The explanation of ILM is given in section 7.3
Risk-weighted assets (RWA) for operational risk are equal to 12.5 times ORC.

² For example, given a BI of SAR 140 billion, BIC = (SAR 140 billion x 12%) + [(SAR 140 billion – SAR 4.46 billion) x 3%] + [(SAR 140 billion – SAR 133.8 billion) x 3%] = (SAR 140 billion x 12%) + (135.54 billion x 3%) + (6.2) x 3%) = SAR 21.05 billion.

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