Operational risk
WHAT IS THIS? Operational risks are those arising from people, processes and systems – the biggest form of exposure for many industries, but one that was neglected by financial firms until the collapse of Barings Bank in 1995. It was added to the Basel capital framework in 2004, but attempts to model operational risk were dealt a heavy blow by the huge, unforeseen losses suffered by banks in the aftermath of the financial crisis.
Operational risk and regulatory capital: do public and private banks differ?
The authors investigate relationships between operational risk and regulatory capital in Indian public and private banks.
A text analysis of operational risk loss descriptions
The authors put forward a workflow for using text analysis to identify underlying risks in operational risk event descriptions.
Banks call for direct oversight of cloud providers by US regulators
Tri-opoly of cloud vendors “poses systemic risk” to financial sector, say risk managers
Goldman most threatened by Fed’s rejig of modelled capital charges
End of credit risk modelling and scaling up of SCB’s role could tip six US banks below minimum requirements
Integrating text mining and analytic hierarchy process risk assessment with knowledge graphs for operational risk analysis
This paper proposes a new method, entitled the risk-based knowledge graph, which is designed to make analysis of safety records from an operational risk perspective easier and more efficient.
Op risk data: UBS lands $380m Archegos loss
Also: BofA billed for bilking customers; red faces over Deutsche greenwashing. Data by ORX News
Third-party guidance spurs US bank rethink on fintech partners
For conventional vendors, banks say due diligence rules will be the toughest challenge
Banks slam zombie floors in Basel endgame proposal
US regulators double down on capital floors despite clampdown on internal models
Power play: how geopolitics is shaping op risk at G-Sibs
Geopolitics is a top five fear for G-Sibs, but most banks lack specialist risk staff and classical tools
Sizing cyber: banks split on who owns and measures hack threats
G-Sibs split on risk modelling and management for IT disruption and infosec
Op Risk Benchmarking: Inside the G-Sibs
New initiative scrutinises op risk measurement and management practices at the world’s largest banks
Op risk data: Aussie insurers caught out in chronic pricing misconduct
Also: JP Morgan settles Epstein lawsuit; US in crypto clampdown. Data by ORX News
Banks frequently breach appetite for top op risks
Op Risk Benchmarking: Five G-Sibs breached appetite in past year across four risk types, new research reveals
Citi cyber chief says AI providing new weapons in hacking wars
Barron-DiCamillo also urges regulators to work with industry best practice, not against it
Clients versus compliance: banks hung up over WhatsApp fines
Most opt for outright ban, but some seek technological solutions to monitor private messaging
Banks’ internal watchdogs bark back at ChatGPT
Generative AI has plenty of uses in finance, but banks must first overcome compliance headaches
Futures industry must hone comms after Ion hack
Operational resilience hinges on maintaining communication channels in a cyber outage
Op risk data: Credit Suisse hit for $900m in offshore trust bust
Also: Goldman boys’ club gets the boot; HSBC double whammy; Havilland’s economic sabotage plan. Data by ORX News
FMIs pose greatest challenge for operational resilience tests
Risk Live: Calls for large-scale industry exercises to plan what happens if major CCPs go down
New BoE rules could force banks to cull multiplying models
Risk Live: Model risk management to become more labour-intensive, as model definition is broadened
Cyber risk definition and classification for financial risk management
The authors put forward a definition and classification scheme for cyber risk than can be used as a template for data collection by financial institutions.
Compliance can help fintechs grow from adolescence to adulthood
It may slow US banking down, but customer safety is the difference between success and failure
Op risk data: Frank fiasco costs JP Morgan $175m
Also: Internal fraud burns fewer fingers, but flame is far from out. Data by ORX News
The information value of past losses in operational risk
The authors argue that past operational losses inform future losses at banks and that the information provided by past losses results from their capturing factors that are hard to quantify in other tests.