  Recently, Basel Committee for Banking Supervision proposed to replace all
approaches, including Advanced Measurement Approach (AMA), for operational risk
capital with a simple formula referred to as the Standardised Measurement
Approach (SMA). This paper discusses and studies the weaknesses and pitfalls of
SMA such as instability, risk insensitivity, super-additivity and the implicit
relationship between SMA capital model and systemic risk in the banking sector.
We also discuss the issues with closely related operational risk
Capital-at-Risk (OpCar) Basel Committee proposed model which is the precursor
to the SMA. In conclusion, we advocate to maintain the AMA internal model
framework and suggest as an alternative a number of standardization
recommendations that could be considered to unify internal modelling of
operational risk. The findings and views presented in this paper have been
discussed with and supported by many OpRisk practitioners and academics in
Australia, Europe, UK and USA, and recently at OpRisk Europe 2016 conference in
London.
