Measuring operational risk: a reality check
In the second of two articles on operational risk, Mark Holmes looks at the measurement issues involved, taking a constructively critical look at the ideas currently in vogue.
Supervision’s proposals for a new capital Accord focus on two sources of risk: credit risk and operational risk. While a more refined approach to credit risk charges has considerable merit, reflecting a broad industry consensus, the proposed Pillar 1 charge for operational risk is more problematic. Though the Basel Committee has worked constructively with the industry
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