On 16th of June 2025, the European Banking Authority (EBA) has released the Final Reports detailing new regulatory and implementing technical standards for the Business Indicator (BI) approach to operational risk capital requirements. These documents are crucial for the implementation of the EU Banking Package as they are set to clarify certain aspects implied by the calculation of the operational risk capital, such as the components of the BI, adjustments for corporate actions, and mapping to financial reporting standards.
Why these technical standards matter In the wake of the global financial crisis and subsequent Basel III reforms, regulators have been on a
mission to strengthen banks’ resilience against operational risks. Therefore, the revised Capital Requirements Regulation (CRR3) introduced a single, non-model-based approach for calculating operational risk capital – the Business Indicator Component (BIC) approach. This shift aims to create a more standardized, transparent, and comparable framework across the European banking landscape.
These technical standards are materializing the mandates given to the EBA (i) under articles 314(9) and 315(3) of CRR for issuing regulatory technical standards (RTS) on the components of the BI and the adjustments for corporate actions, (ii) under article 314(10) of CRR for issuing implementing technical standards (ITS) on mapping the BI-related items to the financial reporting standards (FINREP), and (iii)
under article 430(7) of CRR for the ITS on the relevant supervisory reporting templates.
Clarifications on the three pillars of the Business Indicator: key takeaways The EBA’s regulatory technical standards (EBA/RTS/2025/02) refers to each of the three pillars of the BI, shedding lights on the main aspects mentioned below.
a) Interest, Leases and Dividends Component (ILDC)
The lease-related items included in the Interest and leases component (IC) considers the definition provided in IFRS 16. IC should include incomes and expenses from operating and financial leases, as well as from the investment properties that generate rents.
The Asset component (AC) should include the assets on the balance sheet that generate interest income and/or interest expenses, using gross carrying amounts, the carrying amount or the fair value of certain balance sheet assets, depending on the type of assets. The interest-earning assets perimeter includes also derivatives with flows to the P&L similar to the interest.
b) Service Component (SC)
The EBA details the other operating incomes and other operating expenses, as well as fees and commissions incomes and expenses. According to the EBA RTS, the banks should not include in the Other operating incomes the recovery of administrative expenses, while the banks should consider in the Other operating expenses the boundary losses with credit risk that are not included in the credit
RWA.
c) Financial Component (FC)
The EBA brings clarity on how to approach operations such as economic hedging in order to avoid unwarranted increase of the component by treating them as being under the same book. In this respect, the EBA clarifies that the bank may define its trading book either by using the accounting approach (AA), or by the prudential boundary approach (PBA) , as appropriate, and afterwards identify the relevant P&L flows for calculating the trading book component (TC) and the banking book component (BC).
The EBA mentions the notification of the PBA approach to the competent authority and highlights the necessity for applying the PBA for all three years envisaged for the calculation of FC and in a manner consistent with the rules adopted for calculating the capital requirements for market risk.
d) Items not included in the BI calculation
Referring to the list of items mentioned in article 314(7) of CRR, the EBA clarifies that the bank should not exclude from BI calculation the incomes and expenses related to insurance/ reinsurance if the bank sells/distributes insurance/ reinsurance products, and the financial impact of operational risk events and outsourcing fees paid for supply of financial services, if those are included in other BI components.
BI Adjustments for M&As and Disposals
The EBA has thoughtfully provided alternative calculation methods for when historical data is unavailable or inaccurate. This ensures that even in complex M&A scenarios, banks can provide a fair representation of their operational risk profile.
Therefore, according to the RTS the bank should include the acquired or merged entities or activities based on their three-year audited financial statements, or when such are not available or not accurate, the bank should determine the BI making use of the M&A factor or the forecasted financial data utilized in the final valuation.
Excluding from the BI of the amounts related to the disposed entities or activities is conditional upon obtaining the permission from the competent authority and meeting specific conditions laid out by the EBA. In consideration of the proportionality principle, a materiality threshold has been introduced for disposals, potentially easing the administrative burden for smaller transactions.
Building bridges between Risk and Reporting: reporting templates amended and FINREP mapping
Considering that the new method for calculating the capital requirements for operation risks is based on the reporting data, the EBA has provided (i) in the EBA/ITS/2025/05 the amendments of the reporting templates for Operational risk – Own funds requirements (C 16.01-C16.04) and (ii) in the EBA/ITS/2025/06 a comprehensive mapping of BI components to corresponding FINREP reporting cells. This bridge between operational risk calculations and financial reporting aims to enhance consistency and comparability across institutions, while potentially reducing the operational burden of compliance.
Conclusions and Implications
The new framework for operational risk capital requirements represents a significant step forward in banking regulation, seeking to bring:
✓ Enhanced clarity and consistency by the detailed guidance which should lead to more uniform calculations across the industry
✓ Flexibility with Safeguards by the introduction of the PBA approach
✓ A framework which can adapt to changing bank structures (M&As and disposals)
✓ Increased supervisory scrutiny, as the framework is more transparent and facili.
How Deloitte can guide you through the regulatory maze
As banks grapple with these new requirements, Deloitte stands ready to assist:
• Assess the current internal practices of the institutions to ensure that they are in alignment with the regulations, standards and commonly accepted best practices;
• Design, development and implementation of the necessary controls to ensure compliance with the latest European requirements.
By leveraging Deloitte’s expertise, banks can navigate this complex regulatory landscape with confidence, turning compliance challenges into opportunities for enhanced risk management and operational efficiency.
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