Legal risk losses ‘not on databases’

NEW YORK – Banks are not putting legal risk losses into their op risk databases, said Eric Rosengren, senior vice-president of supervision and regulation at the Federal Reserve Bank of Boston. Rosengren, speaking at the OpRisk USA conference in New York, said he discovered the flaw when he compared the content of external databases with the data firms had submitted as part of the loss data collection exercise (LDCE).

"Many organisations are not including in their loss data any information about lawsuits until they’ve been resolved," said Rosengren. "Sometimes, when just looking at external data, there are a lot of potential losses that may not be reflected in some of the consortium data at this point." He added that firms should reconsider this strategy because "somebody at some point is going to ask you why your internal data isn’t consistent with external data that is publicly available to everybody else."