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.
Wells Fargo op risk charge jumps $3.6bn in Q3
San Francisco-based lender still bound by standardised capital approach
NY Fed CRO urges banks to improve risk controls
Risk USA: Tangled web of controls threatens ability to recover from attacks, says Rosenberg
Op risk charges weigh on ANZ
RBNZ model ban and Apra op risk overlay push RWAs higher
Deutsche’s op RWAs fall 7% in Q3
Wind-down of ‘bad bank’ cuts €3.2 billion in op RWAs alone
Stress-testing to improve strategic decision‑making
Banking regulators remain focused on expanding and developing the range of stress-testing regimes across the globe to maintain stability, monitor emerging risks and avoid another financial crisis. Here, a forum of industry leaders discusses the evolution…
Stress tests, risk-free rates and cross-currency swaps
The week on Risk.net, October 19–25, 2019
PRA grants Barclays £1bn op risk capital relief
Op RWAs fall to £42.5 billion in Q3
Banks detect daylight between EC and EBA on op risk capital
EC consultation seeks input on ‘cliff effects’ of including past losses
LCH leads top CCPs on operational failures
London-based clearing house said core systems were down for over seven hours in 12-month period
US clearers move to dole out losses besides default
ICC wants members to chip in on investment and custodial losses; the OCC, on the whole op risk enchilada
UK banks accelerate RWA increases in Q2
Market and operational RWAs return to growth after shrinking in Q1
Op risk data: Rogue trading costs Mitsubishi $320m
Also: QR code scam costs ING customers; Australia banks hit with Pillar 2 add-ons. Data by ORX News
Risk oversight at Aussie banks under fire again
Asic criticises boards and management for immature oversight of op risks
Basel output floor to bind 29% of big banks
But risk-based capital requirements would constrain the largest number of international lenders
European banks set for 18.6% capital hike under Basel III
Model output floor and higher credit and op risk charges will drive most of the increase
A behavioural lens could help manage human risk
Human decision-making needs careful watching. For that, behavioural science can help
FCA has active pipeline of misconduct investigations
As expansion of SMR to smaller firms looms, regulator says plenty of bankers are under scrutiny
Applying existing scenario techniques to the quantification of emerging operational risks
This paper sets out techniques for: (a) identifying systematically emerging threats, their timescales, and interrelationships (eg, feedback loops and domino effects); (b) quantifying operational risks through structured scenario analysis processes that…
Libor transition and implementation – Covering all bases
Sponsored Q&A
On the selection of loss severity distributions to model operational risk
This paper presents truncation probability estimates for loss severity data and a consistent quantile scoring function on annual loss data as useful severity distribution selection criteria that may stabilize regulatory capital.
Aussie regulator signals tougher misconduct stance
Asic warns it will use new powers to punish misconduct in wake of excoriating Royal Commission review
Op risk data: Sanctions-busting fines cost banks $20bn
Also: ABN pays out for risk profiling fail; Deutsche settles nepotism charges. Data by ORX News
The use of business intelligence and predictive analytics in detecting and managing occupational fraud in Nigerian banks
The goal of this paper is to illustrate how Nigerian banks, and indeed banks elsewhere, can develop solutions that incorporate both BI and predictive analytics techniques in detecting, predicting, preventing and managing occupational fraud.
Complex op risk models open to high error, study finds
Measuring 1-in-1,000 year loss events ‘unrealistic’, researchers say