Operational risk
WHAT IS THIS? Operational risks are those arising from people, processes and systems – the biggest form of exposure for many industries, but one that was neglected by financial firms until the collapse of Barings Bank in 1995. It was added to the Basel capital framework in 2004, but attempts to model operational risk were dealt a heavy blow by the huge, unforeseen losses suffered by banks in the aftermath of the financial crisis.
More than half of banks manage change as an operational risk
Others are moving to incorporate it into risk taxonomies, although some now treat it as a cause, citing supervisory guidance
The AI bot that left the garage
Senior operational risk exec explains how hidden third-party feature could lead to systemic risk
Basel III overhaul doubles Nomura’s credit risk
Surge reflects asset migration and new equity treatment
Risk appetite breaches test development banks
MDBs also more likely to change services or strategy to reduce risk exposure, survey shows
Algos shrugged: AI uptake still lagging in bank op risk
Risk managers acknowledge transformative potential of artificial intelligence – most, from a safe distance
Op risk data: GVA and Nobitex in geopolitical risk strikes
Also: UBS chief a target of third-party data hack, internal bank frauds in Asia. Data by ORX News
A multiplier approach for nonparametric estimation of the extreme quantiles of compound frequency distributions
The authors propose a nonparametric method for estimating extreme quantiles of operational risk reserves by utilizing a lower quantile of the severity distribution.
Can behavioural science curb rogue traders… and compliance costs?
Instead of using surveillance to catch endless bad apples, experts urge banks to clean the barrel
Asic probe piles pressure on ASX to deliver Chess replacement
But market insiders think late intervention by regulators could even slow down implementation
Do bank complexities increase the risks? Insights from four Asian countries
Focussing on China, Malaysia, Pakistan and Qatar, the authors investigate how bank complexity impacts bank risk.
StanChart market RWAs surge to record $37bn
SVAR jump alongside higher interest rate and FX risk behind Q1 spike
The role of banks’ digital transformation in operational risk management: evidence from China
The authors investigate the impact of banks' digital transformation on operational risk, finding that in most cases, this reduces operational risk,
Risk managers say second line needs to identify its value-added
Risk Live: Risk functions must see themselves as problem-solvers, but first line should share responsibility
Regulators urged to use Dora reporting to track systemic risk
Risk Live: Bankers and regulator say governance requirements for new rules are complex to implement
EU tipped to tag less than 30 tech firms as critical for Dora
Irish regulator suggests European supervisors will take narrower view than some feared
Passing the port? Drill needs more CCP hands in key test
As few plan to test porting, brokers say finer asset segregation, reg waivers and capital relief would help
CME suffers longest op failures in seven years
Outages totalled over 13 hours in 12-month period
Why AI-enhanced risk management is vital for open finance
In bank-fintech partnerships, AI can be both a source of operational risk and a solution to it
Op risk data: Rates bait and switch incurs Capital One punishment
Also: Crypto firms suffer cyber setbacks, Umpqua in Ponzi play, and QSuper premium palaver. Data by ORX News
NY Fed Home Loans Bank spurns multi-cloud model
Cost and complexity of diversifying away from big three providers outweigh concentration risks
SEC faces debate over possible cull of cyber security rules
Lobby groups pushing for regulator to roll back disclosures, but investors take a different view
FMIs create culture club for op risk
Exchanges and clearing houses seek to build risk resilience among front-line business, amid concerns of overreliance on second line of defence
Are EU banks buying cloud from Lidl’s middle aisle?
As European banks seek to diversify from US cloud hyperscalers, a supermarket group is becoming an unlikely new supplier
Taking the sting out: exchanges and CCPs bolster scenario toolkits
As cyber threats ramp up, the world’s largest exchanges re-assume the worst