Basel II op risk survey launched

Global banking regulators today launched their second survey seeking data on operational losses suffered by banks to help refine the op risk proposals of the Basel II capital Accord.

The primary aim of the survey is to collect granular, or event-by-event, loss data for 2001 to help decide the form and structure of the advanced measurement approaches to gauging operational risk under the Basel II Accord. Banks are asked to complete and return the survey via national supervisors by August 31.

The Basel Committee on Banking Supervision has invited banks to come up with their own ideas on sophisticated ways of measuring the operational risks they face. But lack of data on operational losses has held back progress on developing effective op risk models.

The Basel II Accord will require large international banks for the first time to set aside capital specifically to guard against the risk of loss from operational hazards such as fraud, technology failure and trade settlement errors. Regulators hope the accord will come into effect in late 2006.

The Basel Committee, which in effect regulates international banking, said the survey would collect information on various exposure indicators as well as operational losses. The data would be treated with complete confidentiality.

The Committee said it planned to provide feedback to the banking industry on the survey’s results. But it added this would be done without disclosing individual bank data.

The Basel regulators see the op risk survey as a data collection exercise and therefore launched it ahead of QIS3 – the key third Basel II quantitative impact study planned for October 1.

QIS3 will seek information from banks on the overall impact of Basel II. It will be used as a basis for the third consultative paper on Basel II that the Basel regulators hope to issue in May next year.

They then hope to issue their final version of Basel II by the end of 2003, allowing some three years for banks and national regulators to prepare for Basel II’s coming into effect.

(Details of the op risk survey – Operational Risk Data Collection Exercise 2002 – are available on the Bank for International Settlements’ website: www.bis.org)