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.
Model risk chiefs warn on machine learning bias
ML model outputs open to “potential bias sitting in your datasets”, says RBS model risk head
Banks divided on op risk approaches
EU banks favour standardised approach, North American and Australian lenders the AMA
Top 10 operational risk losses of 2018
Mega-fraud at China’s Anbang pushes up total losses year on year; SocGen suffers double blow
Op risk data: JP fined $135m over depository receipts
Top five losses, plus review of Barclays whistleblower fine. Data by ORX News
Fed economists float new way to project op risk losses
Researchers suggest combining firm’s size with loss history to best predict losses under CCAR
AIIB risk chief on steering China’s World Bank rival
Martin Kimmig on the Asian Infrastructure Investment Bank’s challenge of overcoming patchy credit data
Fall in market risk prods UK bank RWAs lower
Total RWAs amounted to £2.9 trillion at end-September
Brexit may spur higher op risk losses – EBA
Largest five op risk losses in 2018 cost equivalent of 2.1% of EU bank's average CET1
A review of the state of the art in quantifying operational risk
In this paper, the authors provide a comprehensive review of the different approaches developed to model operational risk, specifically focusing on the actuarial approach.
Global perspectives on operational risk management and practice: a survey by the Institute of Operational Risk (IOR) and the Center for Financial Professionals (CeFPro)
This paper presents survey results which represent comprehensive perspectives on operational risk practice, obtained from practitioners in a wide range of countries and sectors.
Op risk data: SocGen hit with $95m money laundering fine
Citi, JP Morgan settle Sibor rigging claims; Europe matches US on AML fines. Data by ORX News
Op risk jumps $7 billion at Aussie banks
Year to year, op RWAs have swelled $24 billion
Basel turns its attention to operational resilience
New working group will focus on business continuity in the age of cyber threats
UK bank misconduct charges dwindle
Six of seven stress-tested banks report 50% fall in legal and regulatory reserves
Basel’s archaic op risk taxonomy gets a makeover
Industry moves to revise out-of-date categories that feature risks such as cheque fraud
FCA survey reveals significant increase in tech failures
Cyber incidents represented 18% of incidents reported to the FCA in year to October
Lifetime achievement award: Craig Broderick
Risk Awards 2019: Goldman’s long-serving CRO helped bank survive the crisis, and then adapt to new world
Anticipating change – How GRC teams can empower the first line of defence
Financial firms are increasingly adopting the three lines of defence framework to manage risk. But how has the model evolved to date and what does the future look like for this key risk management tool?
Is operational risk regulation forward looking and sensitive to current risks?
This paper evaluates the operational risk capital requirements of large US banks to determine whether they are forward looking, sensitive to banks’ current exposures and designed to allow for risk mitigation.
The disputed terrain of model risk scoring
There is no concord on how banks should police their model risk. But two Fed economists have an idea
EU G-Sibs cut $14 billion in op risk
Banco Santander posted the largest decline – at 7% – with op RWAs falling to $70 billion
Goldman, Wells cut operational risk
The two firms reduce op RWAs by combined $15 billion in third quarter
Banks warned of capital add-ons for legacy Libor contracts
UK regulators’ letter to firms could be followed by Pillar 2 charge to speed transition to Sonia