Time to get motivated on modelling
Lack of historical data is hampering financial firms from creating the type of op risk models they must have in place for Basel II compliance. By Oonagh Leighton
Operational risk modelling - in spite of nearly five years of history - is still in its infancy. And while financial services firms covered under the Basel II agreement will have to find a convincing way to model operational risk before December 31, 2007 - or their regulators will be hopping mad - it is likely that even those models will be only 'rough drafts'.
That's because one of the biggest challenges banks face on modelling operational risk is a lack of historical loss data. "The kind of
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