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.
CFTC looks to strengthen oversight of trading obligation
Chief counsel at CFTC highlights weaknesses of bottom-up approach to MAT determinations
Closer ties between banks could mean more risk-taking
Model points to risks of core-periphery structure
Relative values: JPM’s $260m China interns fine tops November losses
Megan van Ooyen from SAS rounds up the top five op risk losses for November
Mixed views on Dodd-Frank rollback
No need to dump central clearing and electronic trading mandates, market participants say
Singapore fines two foreign banks for 1MDB-related breaches
Investigations continuing into Goldman Sachs’ role, regulator says
VM regime threatens explosion of small margin calls
Transfer threshold designed to avoid small payments is unworkable, critics claim
RBS must raise £2bn after failing stress tests
Lender releases new capital plan after worst performance in BoE test
Op risk family tree challenges Basel’s business line focus
Cladistic analysis shows importance of control failure, crime and fraud
Banks and CCPs clash over non-default losses
Banks balk at being on the hook for losses from investments or cyber attack, but many clearers say the risk should be shared
How will banks suffer large op risk losses in the future?
Eight interlocking trends mean more multi-billion-dollar losses to come
The death of one thousand flowers or the AMA reborn?
The author of this paper explores the reasons for the pending demise of the advanced measurement approach (AMA) to operational risk.
Optimal B-robust posterior distributions for operational risk
The aim of this paper is to integrate prior information into a robust parameter estimation via OBR-estimating functions.
RBS mortgage mis-selling returns to haunt lender
Megan van Ooyen from SAS rounds up the top five op risk losses for October
Operational risk modelling – finally?
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The benefit of using random matrix theory to fit high-dimensional t-copulas
This paper uses simulation studies and an example of operational risk modeling to show the necessity and benefit of using RMT to fit high-dimensional t-copulas in risk modeling.
Why did the crisis cause such large op risk losses?
Huge losses from the 2008 crisis can be seen as a short option position
Can the AMA be reborn?
Regulators could rescue op risk modelling through Pillar 2, writes former supervisor
From Russian roulette to overcautious decision-making
Risk-taking ought to be judged by its necessity, not likely outcomes, says Ariane Chapelle
Tweaks to standard op risk method not enough, experts warn
Basel Committee to integrate insurance and divestitures, but SMA still lacks forward-looking approach
Energy risk teams explore use of KRI metrics
KRIs show particular promise for managing operational risk
Wells Fargo pays the price for ‘ghost account’ fraud
Megan van Ooyen from SAS rounds up the top five op risk losses for September
Operational risk and the Solvency II capital aggregation formula: implications of the hidden correlation assumptions
The authors of this paper analyze the Solvency II standard formula for capital risk aggregation in relation to the treatment of operational risk capital.
Interview: US Treasury CRO on credit risk, Tarp and cyber threats
Ken Phelan stresses importance of credit risk management in key Treasury role
Custom models work better for op risks, research finds
Bayesian approach touted for mis-selling and other management failures