OPERA^® Basel II — Wealth Management Capital Allocation Case Study

Risk Framework
BPG worked with the team to develop criteria that mapped the line of business operations and system to the new risk categorization requirements.

The bank's preliminary assessment of requirements had focused almost exclusively on systems used to record and report credit or risk exposure. These systems tracked only activities where the bank was a principal in the transaction or where the bank already had a good understanding of capital at risk.

BPG determined that not all business units within the wealth management organization were required to satisfy the Basel II risk requirements.

BPG experience and knowledge helped the bank separate wealth management activities into two fundamental risk groupings:

Bank Risk — activities the bank performs where it is "at risk" as a principal conducting:

• Corporate finance;
• Trading and sales;
• Retail banking;
• Commercial banking; and
• Payment and settlement.

Non-Bank (Banc) Risk — activities the bank performs when it handles "other people's money" conducting:

• Agency services;
• Asset management; and
• Retail brokerage services.

Using the fundamental risk groupings allowed BPG and the wealth management group Basel II team to better understand their management organization, the specific systems of record involved, the business processes likely to be impacted, and the applicability of the business requirements set forth by the Basel II technology delivery team.

Next: Initial Analysis

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