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.
An operational risk capital model based on the loss distribution approach
In this paper, the author constructs a capital model for operational risk based on the observation that operational losses can, under a certain dimensional transformation, converge into a single, universal distribution.
New method proposed for modelling large op risk losses
Outsize loss events modellable through extension of approach to measuring moderate losses, says research
CFTC puts new spin on spoofing cases
Charges may be brought under regulation 166.3 in cases where intent is hard to prove
Eiopa targets cyber risk in stress tests
Forty-two insurers quizzed on IT vulnerabilities
Asia-Pacific banks grapple with conduct risk rules
Australia, Hong Kong regimes lead in developing conduct risk guidelines; Singapore lags behind
Share of op risk RWAs at US banks falls
Drops at Citi, Goldman, Morgan Stanley suggest op risk capital may have peaked
Finma’s op risk ruling could set precedent, banks hope
Credit Suisse granted capital relief for divested business; others hope for clemency ahead of SMA
Commonwealth Bank hit by A$1bn op risk add-on
Capital charge applied for poor management of operational, compliance and conduct risks
OCC’s Morrison on combating the cyber threat to clearing
Cyber security chief eyes analytics and machine learning to help anticipate – and defend against – breaches
Monthly op risk losses: banks count the cost of IT failures
Also: top five loss breakdown led by Wells Fargo’s $1bn fine. Data by ORX News
Modeling very large losses
In this paper, the author presents a simple probabilistic model for aggregating very large losses into a loss collection.
EU’s evolving CCP resolution rules get mixed reviews
Isda AGM: Parliament tackles big issues in recovery and resolution text, but 'doesn’t go far enough'
Op risk capital: why US should adopt SMA today
No reason to delay roll-out of standardised approach, says TCH’s Greg Baer
Barclays’ cyber chief: try to break your own IT defences
Banks “must go beyond vulnerability assessments”, conference hears
Credit Suisse sheds $11bn in op risk RWAs
Regulator allowed Swiss bank to cut op risk exposure from defunct business
3LOD helps bolster risk culture – banks
Credit Suisse links metrics gleaned from first- and second-line risk managers to pay decisions
Fed risk rating system unifies stress testing and 3LOD
Some banks have qualms over potential downgrades and overlap between first and second lines
Wells Fargo cuts deposits to meet Fed order
$15 billion in financial institution deposits driven out in response to Fed-imposed asset cap
CCPs hike spending on cyber defences
“The thing OCC spent the most incremental funding on in 2017 was improving cyber security,” says COO
Sponsored video: Thomas Lee, Vivo Security
Thomas Lee, chief executive and co-founder of Vivo Security – a start-up firm based in Silicon Valley and sponsors at OpRisk North America – talks about how special the banking industry is to Vivo Security and why its approach to model risk management…
KYC concern slows asset managers’ move into China
Rush into $2.2 trillion China funds market tempered by problems obtaining client data
Monthly op risk losses: China’s Anbang faces huge fraud hit
Also: in-depth look at multi-billion fraud in Indian banking system. Data by ORX News
How not to control trading behaviour
Quants show popular risk measures fail to limit risk-seeking behaviour among traders