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: UBS, Nomura, UniCredit hit with $450m cartel fine
Also: State Street collared for expense overcharging; S&P’s Vix mix-up. Data by ORX News
Cyber attacks top threat to US financial system – bank CEOs
Lawmakers signal readiness to act as finance chiefs warn of heightened cyber risks
Commerzbank’s op RWAs hit 10-year low
The bank added 20bp to its CET1 capital ratio in Q1
Op risk data: Money laundering gaffes cost ABN €480m in penalties
Also: Turkish crypto exchange’s missing $2bn; online payment scams rise during Covid. Data by ORX News
New UK op risk rules elevate management over measurement
Under op resilience rules, firms must plan for all severe stresses, whatever their probability
Op risk update lops £72m off NatWest’s capital requirement
RWAs for operational risk fell 4% in Q1
The economic cost of a fat finger mistake: a comparative case study from Samsung Securities’s ghost stock blunder
This paper quantifies the economic cost of Samsung Securities’s ghost stock blunder using the synthetic control method.
Op risk data: Sberbank suffers $108m supermarket clean-out
Also: Copper trader buys $36m of worthless bricks; big lenders hurt in $400m mortgage fraud. Data by ORX News
Fed economist sounds alert over op risk capital arbitrage
Insurance payouts could allow banks to pare back capital without equivalent reduction in risk, says paper
Users clash with ASX over changes to its DLT settlement system
Industry groups and tech experts worry that proposed last-minute changes will introduce new risks
Fraud op risk losses edged up at UK banks in 2020
An average 38% of losses by value last year were because of internal or external fraud
US regulators seek to tighten cyber incident reporting
New federal rule, mindful of Covid, will force firms to report serious incidents within 36 hours
The impact of culture upon operational risk management guidelines in the banking sector of selected Asian countries
The central banks of different countries regulate ORM according to the specificities of their national banking industry. This paper tests the hypothesis that such regulatory openness results in legal texts that are highly influenced by the culture of the…
Clear, concise, consistent, doable – rules for a risk policy
Effective risk policies may be elusive, but they’re a must, say two veterans of the art
Op risk data: Pandemic paradox of low, low losses
Also: Navient gets schooled for scam; Amex holiday let-down; BNL’s Italian Job hit. Data by ORX News
GFXC sees no changes to code on pre-hedging
Committee rejects calls to set more strict boundaries to controversial practice
Deutsche Börse eyes quantum computing
Pilot application to model enterprise risks cuts computation time from 10 years to 30 minutes
At Canada’s ‘Big Five’, counterparty and op RWAs grew in 2020
Credit, market RWAs ebbed over the year
Op risk managers could be Covid long-haulers
New threats sprang from old sources in this year’s Top 10 op risks, belying a big drop in losses
The importance of getting technology change right
Christoph Kurth, partner and member of the global financial institutions leadership team at Baker McKenzie, covers some of the rapid technological changes under way brought about by, and in the wake of, the Covid-19 pandemic
Top 10 op risks 2021: geopolitical risk
Stimulus unwind, Covid nationalism and regime changes spell volatile operating environment
Top 10 op risks 2021: employee wellbeing
All-encompassing impact of Covid leaves employees with the feeling of ‘living from work’
Top 10 op risks 2021: regulatory risk
Big dip in fines belies lingering fears over Covid loan mis-selling and sanctions risk
Top 10 op risks 2021: organisational change
Change the sole constant as industry ponders its post-Covid future