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.
Rumblings over UK review of ‘bad apples’ regime
Plans to reform Senior Managers and Certification Regime raise concerns over backsliding on conduct in financial industry
CFTC operational resilience rules have ‘no chance’ of revival
Commissioner Johnson touts framework as response to Ion hack, but lawyers say it misses target
How some banks aced the EBA stress test
Four banks actually increased their capital ratios, while US subsidiaries were hit worst
In more than 90% of banks, second line tackles cyber risk
But some regulators would still like to see more 2 LoD risk staffing for infosec and IT disruption
ECB may force banks to rethink cloud just months after Dora
EU regulator pushes multi-cloud strategy for banks, but guidance will not be binding
Op risk data: Santander takes hefty historic hit over PPI mis-selling
Also: Brazil’s cyber screw-up, Barclays’ AML mishap, and MAS metes out more AML fines. Data by ORX News
Almost all banks mandate cyber security training
And unlike other risks, information security coaching moves the internal confidence dial
Regional banks favour scenario analysis over op risk modelling
Domestic and smaller regional players favour scenarios to gauge tail exposure; G-Sibs stick to modelling, for now
Regulators zero in on third-party risk, resilience
In latest survey, 35% of banks say watchdogs have “significantly increased” focus on third-party risk, with reports of arduous inspections and growing resource strain
Mapping the influence of enterprise risk management: a systematic review and bibliometric analysis
The authors conduct a bibliometric analysis and systematic review to investigate the influence of enterprise risk management research.
Ninety-one per cent of banks have specialist teams for resilience risk
Latest survey shows regulatory pressure is driving broader framing of resilience, beyond IT and cyber
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