Operational Risk: Basel II Regulation

Patrick McConnell

This chapter will provide an introduction to operational risk and its regulation, and in particular introduce some of the classifications and categories used to identify and analyse operational risk events. The chapter is not meant to be comprehensive, and more detailed discussions of operational risk and important topics, such as operational risk capital, can be found elsewhere.¹¹   In among others, Cruz (2002, 2003); Cruz et al (2015); Basel (2004, 2006); Jobst (2007); Blunden and Thirlwell (2010) and Cavestany et al (2015). It does, however, provide a brief history of the regulations that apply to operational risk.

THE BASEL COMMITTEE

The Bank for International Settlements (BIS) is an international organisation, headquartered in Basel Switzerland, whose members are the central banks of the 60 participating countries that together account for some 95% of the world’s GDP.²²   Detailed information about the BIS, its organisation and purpose and its committees is available at www.bis.org. The stated mission of the BIS is to “serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for