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.
Regulators need to adopt AI for monitoring, experts say
Growing bank usage of artificial intelligence means authorities must hasten adoption themselves
Stricter vendor regulation not ‘magic pill’, banks say
Third parties would still require oversight from banks, even if formally regulated
BoE to set tolerance levels for operational disruptions
Regulator cites recent TSB and RBS outages as it plans incident response framework
Regulators zeroing in on non-financial risk, say banks
Several big financial firms said to be considering appointing heads of non-financial risk
US bank RWA density edges higher
Morgan Stanley density increases from 41.46% to 45.47% year-on-year
Operational risk measurement beyond the loss distribution approach: an exposure-based methodology
In this paper, the authors present an alternative quantification technique, so-called exposure-based operational risk (EBOR) models, which aim to replace historical severity curves by measures of current exposures and use event frequencies based on…
Distortion risk measures for nonnegative multivariate risks
In this paper, the authors present a way to address multivariate distortion risk measures and give some examples of distortion functions and distributions where the final expression has a closed form.
Op risk data: Mexico bank hack fuels global payment network fears
Also: roundup of monthly loss data sees Wells Fargo in top slot for second month running. Data by ORX News
Mark Yallop on conflicts in fixed income
Banks and their clients need protocol on information sharing, says FMSB chair
Citi’s CRO on the importance of risk sensitivity
Brad Hu talks modelling, CECL and setting risk culture
Actionable data breach insights from op risk modelling
Thomas Lee, chief executive at VivoSecurity, and Martin Liljeblad, operational risk manager at MUFG Americas, examine how a data breach cost model can replace an advanced measurement approach in a structured scenario
CCPs must step up cyber risk efforts, says EU legislator
Policymakers want more focus on non-default loss resources; Eurex Clearing’s Mueller flags investment risk
Op risk standard will hike capital by 11% – latest data
Rises in capital under SMA will vary depending on regulator treatment, writes op risk expert
Banks explore new data techniques to tackle money laundering
Artificial intelligence in tandem with human analysis seen as effective for know-your-customer
An operational risk capital model based on the loss distribution approach
In this paper, the author constructs a capital model for operational risk based on the observation that operational losses can, under a certain dimensional transformation, converge into a single, universal distribution.
New method proposed for modelling large op risk losses
Outsize loss events modellable through extension of approach to measuring moderate losses, says research
CFTC puts new spin on spoofing cases
Charges may be brought under regulation 166.3 in cases where intent is hard to prove
Eiopa targets cyber risk in stress tests
Forty-two insurers quizzed on IT vulnerabilities
Asia-Pacific banks grapple with conduct risk rules
Australia, Hong Kong regimes lead in developing conduct risk guidelines; Singapore lags behind
Share of op risk RWAs at US banks falls
Drops at Citi, Goldman, Morgan Stanley suggest op risk capital may have peaked
Finma’s op risk ruling could set precedent, banks hope
Credit Suisse granted capital relief for divested business; others hope for clemency ahead of SMA
Commonwealth Bank hit by A$1bn op risk add-on
Capital charge applied for poor management of operational, compliance and conduct risks
OCC’s Morrison on combating the cyber threat to clearing
Cyber security chief eyes analytics and machine learning to help anticipate – and defend against – breaches
Monthly op risk losses: banks count the cost of IT failures
Also: top five loss breakdown led by Wells Fargo’s $1bn fine. Data by ORX News