Revised operational risk framework (Basel III)
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Individual Reform: Revised operational risk framework (Basel III) 2026 - 2027

Replace all previous operational risk capital approaches (advanced measurement approach and three standardised approaches) with a single, risk-sensitive standardised approach for all banks

No data available for the deliverable: Replace all previous operational risk capital approaches (advanced measurement approach and three standardised approaches) with a single, risk-sensitive standardised approach for all banks

No data available for the deliverable: Replace all previous operational risk capital approaches (advanced measurement approach and three standardised approaches) with a single, risk-sensitive standardised approach for all banks

No data available for the deliverable: Replace all previous operational risk capital approaches (advanced measurement approach and three standardised approaches) with a single, risk-sensitive standardised approach for all banks

No data available for the deliverable: Replace all previous operational risk capital approaches (advanced measurement approach and three standardised approaches) with a single, risk-sensitive standardised approach for all banks

No data available for the deliverable: Replace all previous operational risk capital approaches (advanced measurement approach and three standardised approaches) with a single, risk-sensitive standardised approach for all banks

Summary

The new framework bases capital on business indicators and historical loss data, with compliance effectively required by July 2025. The new approach is expected to improve risk management and sector resilience.

Canvas not supported.

Is it working?

The reform is nearly complete, with only final compliance and reporting steps remaining.

Actions

The framework is in place and banks are preparing for the transition, with most having been expected to meet the July 2025 deadline.

Are there plans?

Regulatory amendments and guidance have been issued, with QIS and industry engagement ongoing.

Is it on the agenda?

The SARB and Prudential Authority have prioritised this as part of Basel III, with clear implementation timelines.

Goals

To enhance the accuracy and comparability of operational risk capital requirements, replacing legacy approaches with a standardised, risk-sensitive model.

References

Departments / Govt Institutions

Financial Sector Conduct Authority (FSCA) National Treasury South African Reserve Bank (SARB)

Summary

The new framework bases capital on business indicators and historical loss data, with compliance effectively required by July 2025. The new approach is expected to improve risk management and sector resilience. SARB/PA replaced all previous operational risk approaches with a single, risk-sensitive standard across all banks. Three legacy approaches were replaced by a single standardised approach. SARB guidance has been issued and a sector peer review is complete.
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Canvas not supported.

Is it working?

The reform is nearly complete; only final compliance and reporting steps remain. Peer benchmark confirms framework efficacy.

Actions

The framework is in place and banks are preparing for the transition, with most having met the July 2025 deadline. Since then, sector adoption is complete and capital adequacy rising along with peer review outcomes have been positive.

Are there plans?

Regulatory amendments and guidance have been issued, with a qualified impact study and industry engagement ongoing. There is ongoing regulatory monitoring together with capacity-building workshops for banks.
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Is it on the agenda?

The SARB and Prudential Authority have prioritised this as part of Basel III, with clear implementation timelines. The reform is included in SARB Prudential Authority annual priorities and Parliament risk monitoring.

Goals

To enhance the accuracy and comparability of operational risk capital requirements, replacing legacy approaches with a standardised, risk-sensitive model. The main objective is to streamline operational risk capital requirements for banks.

References

Departments / Govt Institutions

Financial Sector Conduct Authority (FSCA) National Treasury South African Reserve Bank (SARB)

Summary

The Prudential Authority has finalised rules to align local bank capital requirements with the Basel III standardised approach to operational risk, integrating it into the broader Basel III/“Basel IV” package on credit, market and output‑floor reforms. This entails phasing out model‑based and simpler indicator methods in favour of a single standardised formula that combines business‑indicator and loss‑history components, with impact studies and calibration work informing transition timelines from 2025 onward. The deliverable is the full migration of all locally regulated banks to the Basel III SA‑OR, including updated PA standards, reporting templates and Pillar 3 disclosure requirements, with transitional arrangements and parallel‑run periods to manage capital impacts and data quality issues.

Canvas not supported.

Is it working?

Reform is on track and broadly supported, with banks adapting internal models, data systems and capital‑planning processes to the new approach. Key watch‑points are the distributional impact across bank business models, the quality and completeness of internal loss‑data, and ensuring that capital outcomes remain consistent with both risk and competitiveness objectives.

Actions

The PA has issued draft and then final prudential standards and guidance on SA‑OR implementation, run impact and calibration exercises with the industry, and aligned regulatory returns and disclosure templates to the new framework, with banks preparing systems and data changes for go‑live within the agreed Basel timetable.

Are there plans?

Regulators continue with plans of impact studies (QIS) across bank types, refinement of loss‑data and business‑indicator reporting, phased transition dates and alignment of the operational‑risk standard with broader Basel output‑floor and leverage‑ratio reforms, with further guidance expected through 2026.
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Is it on the agenda?

Basel III finalisation, including the operational‑risk package, is flagged in SARB/PA prudential‑policy roadmaps and referenced in Budget Review 2026 as part of efforts to maintain global regulatory alignment and safeguard financial stability.

Goals

To implement the Basel III standardised approach for operational risk (SA‑OR), replacing legacy approaches (AMA/BIA/TSA) to improve risk sensitivity, comparability and capital adequacy for South African banks.

References

Departments / Govt Institutions

Financial Sector Conduct Authority (FSCA) National Treasury South African Reserve Bank (SARB)

Summary

The Prudential Authority has finalised rules to align local bank capital requirements with the Basel III standardised approach to operational risk, integrating it into the broader Basel III/“Basel IV” package on credit, market and output‑floor reforms. This entails phasing out model‑based and simpler indicator methods in favour of a single standardised formula that combines business‑indicator and loss‑history components, with impact studies and calibration work informing transition timelines from 2025 onward. The deliverable is the full migration of all locally regulated banks to the Basel III SA‑OR, including updated PA standards, reporting templates and Pillar 3 disclosure requirements, with transitional arrangements and parallel‑run periods to manage capital impacts and data quality issues.

Canvas not supported.

Is it working?

Reform is on track and broadly supported, with banks adapting internal models, data systems and capital‑planning processes to the new approach. Key watch‑points are the distributional impact across bank business models, the quality and completeness of internal loss‑data, and ensuring that capital outcomes remain consistent with both risk and competitiveness objectives.

Actions

The PA has issued draft and then final prudential standards and guidance on SA‑OR implementation, run impact and calibration exercises with the industry, and aligned regulatory returns and disclosure templates to the new framework, with banks preparing systems and data changes for go‑live within the agreed Basel timetable.

Are there plans?

Regulators continue with plans of impact studies (QIS) across bank types, refinement of loss‑data and business‑indicator reporting, phased transition dates and alignment of the operational‑risk standard with broader Basel output‑floor and leverage‑ratio reforms, with further guidance expected through 2026.
rn

Is it on the agenda?

Basel III finalisation, including the operational‑risk package, is flagged in SARB/PA prudential‑policy roadmaps and referenced in Budget Review 2026 as part of efforts to maintain global regulatory alignment and safeguard financial stability.

Goals

To implement the Basel III standardised approach for operational risk (SA‑OR), replacing legacy approaches (AMA/BIA/TSA) to improve risk sensitivity, comparability and capital adequacy for South African banks.

References

Departments / Govt Institutions

Financial Sector Conduct Authority (FSCA) National Treasury South African Reserve Bank (SARB)

Analyst: Tinashe Kambadza
Status: in-progress
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