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.
FCA survey reveals significant increase in tech failures
Cyber incidents represented 18% of incidents reported to the FCA in year to October
Lifetime achievement award: Craig Broderick
Risk Awards 2019: Goldman’s long-serving CRO helped bank survive the crisis, and then adapt to new world
Anticipating change – How GRC teams can empower the first line of defence
Financial firms are increasingly adopting the three lines of defence framework to manage risk. But how has the model evolved to date and what does the future look like for this key risk management tool?
Is operational risk regulation forward looking and sensitive to current risks?
This paper evaluates the operational risk capital requirements of large US banks to determine whether they are forward looking, sensitive to banks’ current exposures and designed to allow for risk mitigation.
The disputed terrain of model risk scoring
There is no concord on how banks should police their model risk. But two Fed economists have an idea
EU G-Sibs cut $14 billion in op risk
Banco Santander posted the largest decline – at 7% – with op RWAs falling to $70 billion
Goldman, Wells cut operational risk
The two firms reduce op RWAs by combined $15 billion in third quarter
Banks warned of capital add-ons for legacy Libor contracts
UK regulators’ letter to firms could be followed by Pillar 2 charge to speed transition to Sonia
Op risk data: conduct risk losses top $600 billion since 2010
Swift hack targets State Bank of Mauritius; Capital One, Mashreq, hit by AML fines. Data by ORX News
Machine learning hits explainability barrier
Banks hire AI industry experts in face of growing regulatory scrutiny
Python – Is the buzz justified?
Python is rapidly becoming the world’s most popular programming language and its versatility and ease of use has enabled it to achieve widespread adoption in finance, becoming the multipurpose tool of choice for quantitative analysts and other financial…
Predictive fraud analytics: B-tests
In this paper, the authors look at B-tests: methods by which it is possible to identify internal fraud among employees and partners of the bank at an early stage.
Wells Fargo cuts $24 billion of RWAs
Optimisation efforts preserve capital ratio despite $14.5 billion of cash returns to shareholders
Op risk data: SEC issues first fine under cyber risk rule
SocGen provisions for sanctions violations; has the SMR prompted more bank CEO resignations? Data by ORX News
Output floor to constrain almost half of G-Sibs – Basel study
The Basel III output floor will impose the single largest Tier 1 capital requirement on 46% of G-Sibs
Basel III op risk capital savings dissipate for G-Sibs
Median savings shrink to 5.1% from 19% at end-2015
Basel III: EU G-Sib capital requirement to jump 25%
Basel III output floor will add 5.4% to minimum required capital
BAML exec fears ‘systemic risk’ if margin issue not resolved
Regulators urged to make swift decision on exempting small end-users
A general framework for constructing bank risk data sets
This paper proposes a general framework for constructing bank risk data sets, which provides an integrated process from data sources to comprehensive risk data sets.
UK banks build up risk in Q2
Total RWAs were up £57 billion, from £2.89 trillion to £2.94 trillion
Danske admits ‘major deficiencies’ in money laundering case
CEO quits as bank publishes internal investigation into irregular operations at Estonian branch
Do two sizes fit all? Banks aim to standardise vendor risk
Banks created TruSight and KY3P to vet supplier risk with standard questionnaires. Is it enough?
Cyber security begins a shift to the risk department
Normally the province of IT, cyber defence is increasingly seen as a critical part of operational risk