Operational risk capital requirements (ORC) are calculated by multiplying the BIC and the ILM (which is set equal to 1) (OF16.00.01.02, OF16.00.01.03, SC16.00.01.02 and others, Bank of England check boe_b0509)

The rule in plain words

What to do if your return fails it

1. 01Open the tables below and find the cells the rule reads.
2. 02The two values must be the same. Find which of the two is right, and correct the other one.
3. 03The Bank of England allows a small rounding difference, worked out from the decimals each value is reported with.
4. 04It runs only when your filing indicators mark OF16.00.01.02 and OF16.00.01.03 as reported.
5. 05This is a blocking check. A return that fails it is normally rejected, so fix it before you submit.

The cells it reads

A worked example

With simple numbers.

Which returns it applies to

Line4 Check runs it on the own funds (PRA001) and own funds for SDDTs (PRA116) returns on Bank of England banking taxonomy 4.1.1. The Bank of England applies it to own funds for SDDTs (PRA116) and own funds (PRA001) returns, as a blocking check.

The Bank’s own words and formula

The first paragraph of the plain words above is the Bank of England’s own, word for word, from its list of validations. The second spells out its formula, with each cell named from its templates.

Other rules on Operational risk: part 2 - minimum required capital (OPR) (OF16.00.01.02)

Every PRA banking rule on OF16.00.01.02

Checks like this one, run at the point of submission, are the first step to real-time supervision. Line4 builds SupTech software for financial regulators that runs checks like these as each return arrives.