The principal features of this risk control assessment method  are (1) “objectivity,” which is realized by estimating the frequency of  losses based on historical internal loss experience and by estimating  the severity of losses based on the transaction amounts pertinent to  the scenarios, and (2) an appropriate level of “sensitivity,” because  changes in the business environment and the implementation of risk  mitigation measures can be reflected in the frequency and severity  of losses by changing the assessment of risk and control as well as  transactions amounts. SMFG, SMBC, and other Group companies using the AMA  measure the maximum operational loss with a 99.9 percentile  confidence interval and a holding period of one year (hereinafter  referred to as 99.9% VaR) by using the four elements. In addition,  99.9% VaR is measured on an SMFG consolidated basis, SMBC  consolidated basis, and SMBC nonconsolidated basis. The  operational risk is measured for each of seven event types defined  under Basel II, and then, by calculating the simple sum for all event  types, 99.9% VaR is measured for each company applying the  AMA. Meanwhile, the Basic Indicator Approach (BIA) is applied to  estimate maximum operational risk losses for Group companies  other than those applying the AMA. Then, the required capital and  risk-weighted assets for SMFG and SMBC Group are measured by  aggregating these figures. The outline of the quantification model for SMBC is as follows.  First, we generate a loss frequency distribution (number of loss  incidents over a one-year period) based on the number of his- torical internal losses. Then, we generate a loss severity distribution  The breakdown of risk-weighted assets by event type for the  Group on a consolidated basis, computed with the previously  described quantification method, is as follows. Please note that the accuracy of quantification model outputs  described above is secured through the regular ex ante and ex post  facto verification processes. This quantification model takes into account not only empiri- cal internal loss data but also potential risk (scenarios) identified in  the risk control assessment. An important feature of this model is  that it enables us to measure and reflect the “low-frequency and  high severity” events of operational risk. Moreover, by introducing a  conversion factor, it is unnecessary to directly estimate 99.9% VaR,  which tends to have a lower accuracy, and stable estimation results  can be obtained by estimating 99.0% VaR which can be estimated  with higher accuracy. Finally, we multiply 99.0% VaR by a conversion factor  mentioned later in the section of “Capital Ratio Information” to com- pute 99.9% VaR. By using the loss frequency and loss severity distribu- tions, the aggregated loss severity distribution is generated by  conducting Monte Carlo simulations and by generating various  combinations of loss occurrence and loss amount which are simu- lated by changing these two factors. 99.0% VaR is calculated from  the resulting aggregated loss severity distribution.  (amount of loss per loss incident) based on internal losses and  frequency of “low-frequency and high-severity” events obtained  through the risk control assessment. (5) Measurement Using the Quantification Model ■ Measurement Using the Quantification Model Distribution of Loss Frequency Sampling of the  number of losses  from the distribution  (e.g., 5 incidents) 0.20 0.15 0.10 0.05 0 0 5 10 15 20 25 30 Number of incidents/year Aggregated Loss Distribution 0.4 0.3 0.2 0.1 0 Aggregated annual loss amount Distribution of Loss Severity 0.30 0.25 0.20 0.15 0.10 0.05 0 0 2 4 6 8 10 Loss per incident 99.0% 99.9% x  conversion factor Calculate aggregated  annual loss amount  (e.g., 450) Repeat (e.g., 1 million times) Total Sampling of the amounts  of losses corresponding  to the above number of  losses from the distribution  of losses (e.g., 50, 100, 80,  150, 70) Frequency  x  Severity Probability of occurrence  (frequency) Probability of occurrence  (frequency) Probability of occurrence  (frequency) SMFG  2011 45