AMA Group

The Advanced Measurement Approaches Group (AMAG) is open to any banking and/or financial institution regulated in the United States, which is either mandated, opting in, or considering opting in to the Advanced Approaches under Basel. A senior officer responsible for operational risk management represents each member institution on the AMAG

AMAG was formed in mid-2005 at the suggestion of the U.S. Inter-Agency Working Group on Operational Risk. The purpose of the group is to share industry views on aspects of AMA implementation with the U.S. financial services regulatory agencies toward a goal of successful AMA implementation.

AMAG supports the Advanced Measurement Approaches (AMA) and its fundamental goals of improving operational risk management practices and ensuring capital adequacy. To achieve these goals AMAG believes, first and foremost, that approaches should promote flexible principles-based and risk-based methods for estimating capital and managing operational risk. Second, AMAG advocates a proper balance between management and quantification.

Since its formation, AMAG has operated in a relatively fluid regulatory environment. During the past four years the group has engaged in a regular dialogue with key regulatory representatives, working sessions, and the development of white papers in the furtherance of its mission.
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AMAG Impact to Date

• Senior staff members at U.S. regulatory agencies have been receptive to the key messages from AMAG; our cornerstone executive summary, AMA Implementation, argues for principles-based supervision and supervisory balance between measurement and management.
• The Inter-Agency Operational Risk Working Group (IAORWG) has welcomed AMAG on an ongoing basis with a focus on transitioning tangible issues from policy to supervision which, from AMAG members' perspective, is most important at this stage.
• AMAG has received positive feedback from senior agency officials on the group’s Capital Estimation and Scenario Analysis Range-of-Practice papers, and more recent Industry Position papers and discussions on BEICF, unit of measure/dependence, and other topics. Their comments have indicated that the papers have been very helpful in support of the industry–regulatory implementation dialogue and enhanced understanding.

AMAG Activity Highlights

• Ongoing watch briefs and group networking.
• Surveys, discussions, and development of AMAG industry position papers on BEICF, unit of measure and dependence, and ICAAP (May 2008–April 2009).
• Review and index to the Final U.S. Rule (November 2007).
• Ongoing discussions about examination and supervision (June 2007 to date)
• AMAG extensive Range-of-Practices survey and paper on Scenario Analysis (May–December 2007).
• AMAG Response to the U.S. Proposed Supervisory Guidance (May 2007).
• AMAG white paper and Executive Summary on Capital Estimation Range of Practices (August–December 2006), based on an extensive survey of member practices.
• Review and analysis of the notice of proposed rulemaking (NPR): collated members’ assessment of priority issues for discussion; developed and released AMAG response (March, 2006–March 2007).
• Review and commentary on AIGOR’s Range of Observed Practices (June 2006); Response to AIGOR on the paper (July 2006).
• Development and release of white paper, AMA Implementation; meetings with key agency officials (2005).

The group has engaged in numerous meetings/discussions with key agency representatives, including, but not limited to, meetings with former Fed Governor Susan Bies, former Vice Chairman Roger Ferguson and senior staff at the Federal Reserve Board (2005), Roger Cole, director of banking supervision and regulation at the FRB (2005, 2007 and 2008), Eric Rosengren, Patrick deFontnouvelle and the Federal Reserve Board Boston Quantitative Analysis Team (2005, 2008 and 2009), Jeanmarie Davis SVP, manager of Large Complex Banking Organizations Department, FRBNY (2008); Meetings with Comptroller Dugan (2005), Kevin Bailey, deputy comptroller of the OCC (2007 and 2009), and senior staff at the Office of the Comptroller of the Currency; meetings with senior staff at the Federal Deposit Insurance Corporation (2005) and at the Office of Thrift Supervision (2006); as well as meetings with the IORWG and the AIGOR (2006, 2007 and 2008).

Industry Position Papers

During 2008–09, AMAG embarked on developing a series of Industry Position Papers (IPP’s) as a means of fostering a productive dialogue between the industry and the regulatory agencies in the U.S. about the practical implementation of the specifics of AMA.
This latest effort began with a survey of members to capture key issues. Then a series of AMAG and individual discussions were held to attain greater clarity about industry practices. The initial series included:

1. Business Environment and Internal Control Factors (BEICF)
2. Unit of Measure (UoM)/Dependence
3. Internal Capital Adequacy Assessment Process (ICAAP)

Of the twenty or so banking institutions that are currently viewed as mandatory or opt-in Basel II institutions by the U.S. regulatory agencies; twelve are currently members of AMAG. As of August 2009, the member firms are:

• BNY Mellon
• Comerica
• Deutsche Bank
• Goldman Sachs
• HSBC
• JP Morgan Chase
• Keycorp
• Morgan Stanley
• State Street
• SunTrust
• Union Bank of California
• Wells Fargo/Wachovia

The Risk Management Association (RMA) provides the support team and facilitation for the AMAG.

Contacts for further Information

Mr. Dan Roussell, Chairman, AMAG
SVP and Head of Operational Risk
State Street Corporation
617-664-5680
djrousselljr@statestreet.com

Mr. Ed DeMarco, Member, AMAG
RMA General Counsel and Director of Strategic Planning
The Risk Management Association
215-446-4052
edemarco@rmahq.org

Mr. Douglas G. Hoffman, Facilitator, AMAG
President
Operational Risk Advisors LLC
203-259-4730
doug.hoffman@opriskadvisors.com