New multi-bank op risk data pooling venture

Over a dozen large global banks plan to form a new not-for-profit venture to pool operational risk data this spring. The Operational Risk Data Exchange (ORX) will be incorporated in Switzerland – selected for its data privacy and confidentiality laws – and will replace earlier multi-bank operational risk data pooling ventures in Europe and North America.

Angelina Colombo, a project manager for the Multibank Operational Risk Exchange (MORE) the current North American operational risk data pooling venture, which is maintained by New York-based op risk consultancy OpVantage, confirmed that MORE member banks are seeking to join ORX, and that MORE would close if ORX goes forward as planned.

According to Fred Peemoeller, head of operational risk for Deutsche Bank in Frankfurt, 40 banks have been following the ORX working group discussions, which began in mid-2001. Banks from all over the world are involved, he says.

Participation in ORX will be open to all banks subject to with the new Basel II capital Accord, slated to become effective in 2005. ORX participants will only be able to access data for business categories for which they have submitted their own operational risk data history.

Under the new Accord, banks that adopt the advanced op risk measurement approach could have a 25% lower op risk capital charge than institutions using the standardised approach. But Peemoeller says the data quality standards to qualify for the advanced measurement approach are high, and large global banks will look to ORX to supplement their own data. “Specifically for the larger banks it is a problem of data completeness and accuracy is still a major problem,” he says.