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The Basic Indicator Approach (BIA) and the Standardised Approach (SA) are two key methodologies prescribed by the Basel framework for calculating operational risk capital requirements in banks. Both approaches aim to ensure banks hold adequate capital against losses arising from failed internal processes, people, systems, or external events. However, they differ in complexity, capital computation, qualifying criteria, and risk sensitivity. The Basic Indicator Approach is the simplest method for measuring operational risk. Under BIA, a fixed percentage (usually 15%) of the average annual gross income over the past three years is used to calculate the capital charge. This approach does not differentiate between the types or sources of income and treats all business lines uniformly. It is suitable for smaller banks or institutions with limited operational risk management _____ ________ _____ _____ __________ _________ ____ ______ __________.
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