Using correlation to model op risk losses may be unsafe – study

Techniques for linking economic factors and bank losses produce varying – and sometimes contradictory – results

‘Under maintenance’ sign

Banks cannot rely on assumptions that operational risks are correlated with economic factors, casting doubt on the loss projections used in bank stress tests, new research suggests.

Operational risk predictions are a key part of regulatory stress-testing, but “wide error margins” in the correlations mean the forecasts may be flawed, according to a paper by Peter Mitic, head of operational risk methodology for UK at Santander. The paper was published in the Journal of Operational Risk in June.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options


Want to know what’s included in our free membership? Click here

This address will be used to create your account

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here