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.
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
Operational Risk Awards 2017: call for entries
Practitioners, vendors and service providers invited to enter by the end of April
Mortgage and auto loan securitisations inflict op risk losses
Megan van Ooyen from SAS rounds up the top five operational risk losses for March 2017
Model risk managers eye benefits of machine learning
Ramp-up in regulatory scrutiny of model validation sees banks turn to black boxes
Spike in bad loans raises scrutiny of P2P credit models
Jump in delinquencies at some lenders prompts questions over modelling practices, but firms stand by their approach
Regulatory blitz weakening model risk management, say banks
Smaller banks’ modelling practices under growing scrutiny, but ability to comply is stretched
Scrap ‘absurd’ op risk RWA framework, says Sands
Ex-StanChart chief exec advocates replacing current op risk capital framework with regulator-set buffer
Banks rush to protect against data breach fines
Cost of implementing GDPR ‘could reach hundreds of millions’ for largest banks