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.
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.
Application of the radial basis function in solving an operational risk management model: investigating the probability of bank survival with risk reserves
The authors investigate the probability of bank survival in relation to operational risk and risk reserve and calculate the amount of risk storage necessary to achieve the desired probability of survival.
Does board diversity mitigate firm risk-taking? Empirical evidence from China
The authors explore the relationship between firm risk and both demographic and cognitive-oriented board diversity.
Basel climate guidance leaves op risk managers in the dark
Banks still unclear on how to fit climate events into existing capital framework
In a downturn, mitigation beats litigation every time
Economic shocks increase op risks for banks, but institutions can take steps to limit the danger
Mizuho fined over deal contingent FX forwards
CFTC finds clients weren't told about pre-hedging activity that likely resulted in worse pricing
FRTB implementation: Spotlight 2023
The Fundamental Review of the Trading Book (FRTB) introduces significant technical and operational challenges for banks on the path to compliance.
Legacy legal costs could stretch state support for UBS
Downside protection of Sfr9 billion must cover numerous outstanding claims against Credit Suisse
Op risk data: Wells Fargo whacked for Wachovia lapse, and a Ponzi slap
Also: Long and winding road to the end of Credit Suisse; Swedbank IT fails. Data by ORX News
Fed preps new white paper on cyber incident reporting
New proposals due on data capture after Fed dumps bid to use DFAST submissions
Hurdles to cross-border data sharing impede AML fight
Expansion of national initiatives hampered by data-privacy and information-security fears