Correlation of op risk losses could send capital soaring
The assumption that operational risk losses are independent and identically distributed (IID) might be leading banks to underestimate their capital levels; and if losses are correlated, op risk capital may be between 16% and 55% higher, according to research by Daniel Stahl, senior internal auditor at US bank BB&T.
"If you have a very severe loss, it will attract management focus and all sorts of resources will be focused on that issue," says Stahl. "That possibly leaves other parts of the bank
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