The Basel Committee on Banking Supervision proposed a new capital framework called Basel II in 2001, which includes a capital charge against operational risk for banks. This is due to the increase in large losses in financial institutions caused by operational risks, like unauthorized trading. In 2003, the Committee refined its recommendations in a third consultative paper (CP3) on Basel II, but there is still controversy and a need for clarification on regulating operational risks. The paper explores issues arising from the Committee's recommendations and assesses their suggestions in CP3, particularly in relation to operational risk losses at Allied Irish Banks.