INTM267743 | Foreign banks trading in the UK through permanent establishments: The approach in determining an adjustment to funding costs - STEP 2: Risk weighting the assets - the Basel II regulatory regime: Pillar 1 - the standardised approach to operational risk

From HM Revenue & Customs · International Manual

Under TSA the bank’s activities are divided into eight business lines. The capital required to support the operational risk is calculated by multiplying the gross income from each business line by the relevant indicator assigned to it by the Prudential Regulation Authority (PRA). This gives the operational risk capital requirement for the year for that business line. The total operational risk capital requirement is the average of the sum of the capital charges across all business lines in the three preceding years.

The business lines and indicators are:

Business LineIndicator
Corporate Finance18%
Trading and sales18%
Retail Brokerage12%
Commercial Banking15%
Payment and settlement18%
Agency services15%
Asset management12%
Retail banking12%

Details of the activities within each business line can be found at “Prudential sourcebook for Banks, Building Societies and Investment Firms” (BIPRU) 6.4.15.