The case of the missing controls?

The Basel regulators' proposals for operational risk aren't as risk-sensitive as the committee seems to think, says Tony Blunden. He argues the supervisors should pay more attention to recent developments in corporate governance.

The commitment of global banking regulators to creating a risk-sensitive capital charge that banks can make for operational risk seems not to be fully carried through in the detailed models given in the regulators' latest proposals on the subject.

The Basel Committee on Banking Supervision, the body that regulates international banking, is proposing a limited number of relatively risk-insensitive indicators to help set capital charges against operational risk. Examples of such indicators

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