The Basel Handbook
First published:
ISBN: 9781904339557
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Implementing a Basel II Scenario-Based AMA for Operational Risk
Ulrich Anders and Gerrit Jan van den Brink
Development and Validation of Key Estimates for Capital Models
Explaining the Correlation in Basel II: Derivation and Evaluation
Explaining the Credit Risk Elements in Basel II
Loss Given Default and Recovery Risk: From Basel II Standards to Effective Risk Management Tools
Assessing the Validity of Basel II Models in Measuring Risk of Credit Portfolios
Measuring Counterparty Credit Risk for Trading Products under Basel II
Implementation of an IRB-Compliant Rating System
Stress Tests of Banks’ Regulatory Capital Adequacy: Application to Tier 1 Capital and to Pillar 2 Stress Tests
Advanced Credit Model Performance Testing to Meet Basel Requirements: How Things Have Changed!
Designing and Implementing a Basel II Compliant PIT–TTC Ratings Framework
Basel II in the Light of Moody’s KMV Evidence
Basel II Capital Adequacy Rules for Retail Exposures
IRB-Compliant Models in Retail Banking
Basel II Capital Adequacy Rules for Securitisations
Regulatory Priorities and Expectations in the Implementation of the IRB Approach
Market Discipline and Appropriate Disclosure in Basel II
Validation of Banks’ Internal Rating Systems – A Supervisory Perspective
Rebalancing the Three Pillars of Basel II
Implementing a Basel II Scenario-Based AMA for Operational Risk
Loss Distribution Approach in Practice
An Operational Risk Rating Model Approach to Better Measurement and Management of Operational Risk
Constructing an Operational Event Database
Insurance and Operational Risk
BASEL II REQUIREMENTS FOR OPERATIONAL RISK
Simply speaking, operational risks are the risks originating from the firm’s operational processes. Operational risk is the risk of suffering losses in processes caused by inadequacies or failures or insufficient quality in the organisation, technology, knowledge, staff, infrastructure, control function or other resources. The higher a possible loss will occur, the higher the operational risk.
With Basel II, operational risk is now subject to regulatory review: (a) the management of operational risk needs to fulfil qualitative requirements; (b) there will be a capital charge for operational risk similar to capital charges of both credit risk and market risk. With these, Basel II seems to pursue the following goals: (a) operational risk in banks should be adequately managed and (b) banks must be able to cover large operational risk losses through equity capital.
According to the current regulatory requirements, banks should:
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assess their operational risks;
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collect their losses caused by operational risks;
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implement operational risk indicators; and
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calculate and set aside risk capital.
Basel II has three proposed
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