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.
Held in suspense: late futures orders blamed for Covid meltdown
Buy-side use of average pricing contributed to rash of failed trades and give-ups last March
Nordea CRO – a ‘controls freak’ meets Covid
Flexible checks and balances at bank's asset management arm kept risks within tolerance
Derivatives client clearer of the year: JP Morgan
Risk Awards 2021: bank avoided tech snags and margin call surprises that plagued peers during crisis
Risk innovation of the year: Credit Suisse
Risk Awards 2021: new analytics dash helped bank get ahead of op risk breaches during Covid crisis
Detection of financial fraud risk: implications for financial stability
This introduction to the Journal of Operational Risk special issue shines a light on the relationship between financial fraud risks and financial stability.
Jumbo Goldman 1MDB fine upends 2020 trend to lower losses
Financial fraud and fat fingers loom large, but annual top 10 op risk losses still show fewer fails. Data by ORX News
Deutsche Bank lines up new head of op risk
Appointment follows departure of Bakhshi to CRO role at LSEG
Op risk data: In fewer reg fines, US took its lumps in 2020
Also: Retro Russian embezzlement fines; Barclays slapped for lack of forbearance. Data by ORX News
The strange case of the Jet Airways bankruptcy: a financial structure analysis
The authors investigate the financial structure of Jet Airways, with the aim of understanding whether financial turbulence for an airline company can constitute an antecedent for predicting the risk of bankruptcy.
Risk committees: designing a horse and getting a camel?
When we examine what’s required of them, do risk committees hold water, asks ex-SEC risk oversight chief
Four in five European banks don’t model their op risks
Advanced measurement approach is the preserve of large banks
DBS chief executive on fighting tech disruptors with data
Asia Risk 25: Data and AI are top technology priorities for Singapore bank, says Piyush Gupta
Ten laws of operational risk
This paper sets out ten laws that govern the behavior of operational risk relating to the occurrence and detection/duration of events; the rapidity with which firms suffer losses; the lags in crystallization of losses; and internal and external drivers…
Quantification of regulatory capital for management of operational risk in banks: study from an emerging market economy
This paper studies the various methodologies used by an Indian bank in its operational risk management activities: these include loss database analysis, risk control self-assessment and key risk indicator (KRI) identification.
Must do better – Apac slow to curb control risk
Asia Risk 25: Even as the level of regulatory scrutiny peaks, meaningful change eludes the region’s banks
Output floor to drive Basel III capital increase at EU banks
About 40% of total Tier 1 capital surge due to limits on modelled RWAs
Is there anybody out there? Detecting operational outages from Large Value Transfer System transaction data
This paper develops a method to identify operational outages of participants in the Canadian Large Value Transfer System (LVTS).
Wind-down of Deutsche’s ‘bad bank’ slows
German lender expects capital release unit to be €51 billion in size in 2022
Op risk data: Brazil’s Líder unredeemed
Also: CEO clawbacks; Barclays timeshare trials; Fifa bankers' foul play. Data by ORX News
CLS: can’t live with ’em, can’t live without ’em?
FX settlement giant not fast on its feet, say dealers and challengers, but hard to knock down
HSBC exec: measure culture through smarter surveillance
Machine learning could help gauge positive sentiment from surveillance logs, says Elhedery
Regulators voice concerns over cloud risk
Risk USA: failure of big cloud service provider could cause “a very large shock”, says NY Fed exec
NY Fed’s Stiroh: ‘cultural capital’ at risk in pandemic
Risk USA: remote working could “erode” the culture of financial firms, says senior regulator
US systemic banks’ op risk charges fell in Q3
Bank of America’s charge falls 26% following a model change