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.
Op risk data: Wells Fargo walloped to the tune of $1.7bn
Also: AML breaches at Danske and Santander; Russia’s Radiotechbank scammed. Data by ORX News
Court allows lawsuit against Credit Suisse to proceed
Shareholder alleges board and senior execs breached fiduciary duties by failing to oversee risk
Financial firms rethink after cyber insurance premium spike
Brokers say there are signs pressure is easing, but quantum hacking threat could transform market
Machine learning for categorization of operational risk events using textual description
The authors summarise ways that machine learning can help categorize textual descriptions of operational loss events into Basel II event types.
Op risk data: SEC skewers Goldman for specious ESG claims
Also: FTX hacked; Aussie banks schooled for credit insurance mis-sales; more on Glencore. Data by ORX News
Systemic operational risk in the Australian banking system: the Royal Commission
The author investigates the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and its most prominent cases, as well as detailing examples of operational risk events that the commission did not cover.
CBA sheds last $6.2bn of Apra’s op RWA add-on
Punitive charge was imposed in 2018 in wake of inquiry into bank’s practices
Broken chains: how DLT code switch compounded ASX fail
Vendors deemed to suffer most in fallout from “paused” blockchain settlement project
CFTC chair defends under-fire crypto bill following FTX debacle
Proposed legislation addresses many of the issues that led to FTX’s failure, Behnam tells Congress
Op risk data: Dodgy tax practices cost Credit Suisse €240m
Also: Binance blockchain hack; ING’s Polish AML fail. Data by ORX News
RBI, ING’s op risk charges inflated by AMA updates
RWAs rise a combined €4.8 billion at the two banks
New risk indicator shifts EU’s G-Sib score heatmap
Revision in substitutability category inflates mid-sized banks’ score, lowers G-Sibs’
Fed official confirms US targeting 2025 for Basel III adoption
US regulators also preparing more guidance on concentration risk for outsourcing providers
Barclays frees up £4.5bn RWAs after overissuance clean-up
The bank unwound hedges that safeguarded its buyback of mis-sold US notes
Cyber incident reporting: convergence is key
FSB working group chair advocates common reporting framework and taxonomy
Hong Kong, India, Turkey lag behind on Basel III framework
Only Canada, Japan and Saudi Arabia ready for full implementation as January deadline approaches
Op risk data: Banks slapped for lax WhatsApp oversight
Also: Wintermute suffers crypto hack; CS settles over Archegos and Greensill. Data by ORX News
EU tweaks set to temper Basel III capital hike by a third
Changes to required capital for credit risk expected to be main driver behind average reduction
Banks struggle to assess climate impact on op risk
Supervisors have provided less stress-testing guidance for op risk than for credit risk
Basel crypto capital plan threatens banks’ DLT projects
Proposed infrastructure add-on could make blockchain settlement and payment systems non-viable
European banks set for 17.5% capital hike under Basel III
Output floor could account for almost half the increase in Tier 1 capital requirements by 2028
How does the pandemic change operational risk? Evidence from textual risk disclosures in financial reports
The authors investigate changes in operational risk profiles of the financial industry following the Covid-19 pandemic.
Modeling systemic operational risk in the Covid-19 pandemic
This paper introduces existing and novel epidemiology models and investigates how government responses to the Covid-19 pandemic impacted these models.
Op risk data: Rost Bank execs conspired in 107bn ruble ruse
Also: Citi stumbles on market abuse; Jefferies faces latest fine over phone misuse. Data by ORX News