Macroprudential Regulation

Patrick McConnell

Chapter 13 will offer a range of suggestions as to how systemic operational risks can be identified and regulated by systemic or macroprudential regulators. The chapter will discuss a framework for regulating systemic operational risk, explore the main dimensions of SOR as defined in Basel II and then look at tools for identifying SORs. Finally, based on the analysis of systemic risks, the concept of a capital charge for systemic operational risk will be considered.

FRAMEWORK FOR THE REGULATION OF SYSTEMIC OPERATIONAL RISK

In 2009, after much discussion, the International Standards Organisation (ISO) through its national bodies released “ISO 31000: 2009, Risk Management – Guidelines on Principles and Implementation of Risk Management” (often called the “ISO 31000 Risk Management Standard”). Figure 13.1 shows the ISO 31000 the risk management framework and process.¹¹   The ISO 31000 Risk Management Process is taken directly from the AS/NZS “4360:2004 Risk Management Standard”.

As ISO 31000 is generic, it is a candidate for consideration as a framework for the management of systemic operational risks. The introduction of an overarching framework for risk management was a