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.
OpRisk Europe and North America wrap: cyber, 3LOD and the SMA
Future of op risk modelling a hot topic at conference, along with evolving three lines of defence framework
Fed examiner calls on banks to rethink KRIs
Most banks fail to establish explicit link between KRIs and identified risk exposures
Banks move to model smaller op risk losses
Credit Suisse is using scenario analysis to model the risks associated with internal fraud losses
OCC warns on cyber risks from subpar patches at US banks
Regulator says banks have good track record overall, but exams reveal weaknesses
Better data key to cyber risk underwriting, say practitioners
Lack of loss data means predictions are a problem
Fed official: banks must recover from cyber attack in two hours
“If you’re waiting for us to give you regulation, you’re behind the curve,” says Fed’s Ferlazzo
CCAR helps identify op risks, banking experts say
Banks forced to consider link between risks and macroeconomic factors
Revised SMA could allow banks to ignore past op risk losses
Leaked proposals say loss component will be left to national regulators, threatening an unlevel playing field
Three lines of defence model still evolving, say practitioners
Clearer split in responsibilities between first and second lines needed, say op risk chiefs
Cyber insurance not a risk management tool, say banks
Lengthy payout mechanism of cyber policies makes it ineffectual against large losses, dealers argue
On a family of weighted Cramér–von Mises goodness-of-fit tests in operational risk modeling
This paper applies classical theory to determine if limiting distributions exist for WCvM test statistics under a simple null hypothesis.
Don’t let the SMA kill op risk modelling
The SMA is not a good response to the AMA’s failings – but don’t throw the baby out with the bathwater
Time trial: the big risks that lurk in OTC margin gaps
Banks take aim at margin and trade-flow lag that can cause 95% of counterparty risk
Various approximations of the total aggregate loss quantile function with application to operational risk
This paper investigates the mechanics of the empirical aggregate loss bootstrap distribution.
Dexia official acquitted of alleged swaps fraud in Italy
City of Prato likely to appeal despite perjury claims
Banks less stressed about CCAR
Fed’s 2017 stress test assumes 10% peak unemployment and sharp drop in commercial property prices
Corlytics: data reveals least-predictable regulators
Regtech start-up says NY watchdog’s record has prompted banks to retreat
Basel opts for aggregate bank capital output floor
Banks will have more flexibility on use of internal models, but calibration still undecided
Memo to bank CEOs: treat op risk with more respect
High-profile critics of op risk capital rules are misguided, say Ariane Chapelle and Evan Sekeris
Dexia faces fraud charges over ‘hidden costs’ in swaps deal
Italian fraud trial could spell trouble for other banks providing municipal swaps contracts
Cluster model relies on op risk ‘storms’
Capital models should reflect loss grouping – research
Regulators told to play greater role in cyber security
Companies can’t battle threats on their own, CFTC told
Bank scandals suggest cultural problems are industry-wide
Libor-rigging and similar misconduct across multiple firms may be the result of 'macro-cultures'
Nickel-and-Dimon: why bank CEOs loathe op risk capital
JP Morgan’s Jamie Dimon and ex-StanChart CEO Peter Sands are no fans of the RWA approach