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.
Swaptions expiries complicate portfolio optimisation runs
triBalance and Quantile users call for better post-trade co-ordination between dealers
Cyber risk a top threat for energy firms
Cyber crime cited among top three external risks; scarce data makes modelling difficult
US Treasury hands CCP resolution powers to FDIC
Mnuchin regulatory review explicitly refers to FDIC as receiver under a Title II resolution
Monthly op risk losses: Equifax breach sparks regulatory review
Breakdown of top five loss events, plus spotlight on Sweden’s largest ever phishing attack. Data by ORX News
Fed’s outgoing CCAR chief defends stress tests
Timothy Clark rebuffs US Treasury recommendations; supports more transparency
Buy side balks at costs of SMR extension
Expansion of scheme will bring 47,000 firms in scope; compliance and recruitment costs set to rise
Malaysian central bank called to act against 1MDB officials
Bank Negara Malaysia says it will continue to work with international agencies over alleged fraud
Bankers warn first TLAC bail-in could spark market shock
Regulators urged to clarify treatment of bail-in bonds under both TLAC and NSFR rules
Not on the list: Mifid’s systematic internaliser mystery
Self-identification of systematic internalisers in derivatives could fuel buy-side confusion
Monthly op risk losses: Aequitas faces $192m loan settlement
Breakdown of top five loss events, plus ECB’s Ireland fine and mortgage losses in Spain. Data by ORX News
CCAR feedback prompts banks to improve governance
Dual reviews of stress testing models and scenarios becoming the norm
Citi hires Deutsche’s Americas op risk chief
Experienced op risk manager named global head of op risk for bank’s institutional clients group
SMA: the story so far
Read Risk.net's coverage on the controversial move to the standardised measurement approach
Asia warned of LEI crunch over Mifid II deadline
Tens of thousands more Asian LEIs needed to avoid European trading lock-out in January
Op risk managers give cautious welcome to new internal audit code
Updated guidelines could strengthen third line of defence, but firms warn costs could increase
Heads in the cloud: banks inch closer to cloud take-up
Regulatory guidance helps clear the way for greater adoption of cloud computing
Bank of the West’s Pollino on being loud about insider fraud
Cyber-security officer applies ‘broken windows’ theory to financial fraud prevention
The issues with the standardized measurement approach and a potential future direction for operational risk capital modeling
This paper discusses the criticism and praise the SMA and AMA have received, respectively, in many recent articles.
This tangled web: banks seek to contain systemic model risk
Network studies are being used to identify model dependencies and concentrations
Credit Suisse seeks capital relief for resolution unit
Finma to rule on whether divesting businesses can reduce op risk RWAs
An operational risk-based regime-switching model for stock prices
This paper proposes a new risk-based regime-switching model for stock prices to examine the impact of operational risk events on stock prices.
Banks warned off machine learning for model risk
Banks acknowledge they “cannot hide behind a complex tool” to assess interconnectedness
Insurers blind to new threats, network analysis suggests
Risk taxonomies driven by top-down approach or externally imposed labels expose firms to blind spots
Modelling cyber risk: FAIR’s fair?
Proponents say factor analysis can be applied to cyber risk; detractors retort results are still guesswork