In the UK, the FSA is in the process of incorporating guidance and rules related to the management of operational risk. The FSA's approach is in keeping with the sentiment of the Basel proposals by allowing firms some flexibility in their choice of approach to operational risk management. The FSA have also set up an Operational Risk Standing Group (ORSG) a pre-consultation forum for discussing operational risk policy isues arising from Basel (II) and the EU Risk Based Capital Directive (RBCD), the FSA's articulation of its potential solution in the Prudential Source Book and other domestic (UK) operational risk issues.

In September 2004, the FSA announced that it would be delaying, until further notice, the implementation of the Prudential Sourcebook text for 'systems and controls' (SYSC 3A) (the original December 2004 deadline will apply to insurers only). The reasons behind the delay relate to the arrival of two EU directives (the Capital Requirements Directive and the Markets in Financial Instruments Directive - MiFID) which will oblige the FSA to make changes to their systems and controls requirements.

Prudential Sourcebook

The FSA's Near-Final text on prudential risks systems and controls, which bring together the main prudential requirements organised by risk (for example, credit risk, market risk, insurance risks etc) was published in October 2003. This followed a period of extensive consultation

CP142

The FSA's Consultation paper 142 entitled 'Operational risk systems and controls' was published in July 2002. The period for consultation responses ended on 31 October 2002. The FSA published 'Building a Framework for Operational Risk Management' in response to the consultation.