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.
Digital exposure makes fraud management a vital responsibility for financial institutions
Fraud management and detection continue to be an increasing area of concern for financial institutions worldwide
EU banks need ‘billions’ in hedges to pass new NII test
Declines in net interest income can be hedged, but the markets may struggle to handle the demand
CFTC chair gloomy over crypto legislation prospects
FIA Boca 2023: Behnam also asks Congress to grant more powers to regulate third-party tech providers
Top 10 operational risks: Focus on third-party risk
Ion hack deals industry painful reminder on drawbacks of outsourcing
Top 10 operational risks: Focus on cyber risk
All firms fear data breach; smaller banks also concerned over IT disruption
Small banks set for 2% capital reduction under Basel III
Lower leverage ratio requirements expected to offset Tier 1 capital increases for credit risk and output floor
One-fifth of CME clearing members hit by Ion hack
Advisory committee heard CFTC believed it could “play a more direct role” in cyber security practices
RBC’s settlement risk charges blow up 260%
C$3.5 billion RWA figure marks one of the heftiest capitalisation of held-up trades ever by a bank
Top 10 operational risks for 2023
The biggest op risks for the year ahead, as chosen by senior industry practitioners
OK regulator? How AI became respectable for AML controls
Dutch court case pressures supervisors to accept new tech; explainability the key challenge
Top 10 op risks 2023: regulatory risk jumps sharply
Cyber and third-party risks also rise, along with concerns around data management and execution errors
Measuring tail operational risk in univariate and multivariate models with extreme losses
The authors consider operational risk models and derive limit behaviors for the value-at-risk and conditional tail expectation of aggregate operational risks in such models.
Operational risk: a global examination based on bibliometric analysis
The authors quantitively assess the quality of research on operational risk and find that research in this area has grown in popularity in recent years.
RBI reverts to standardised op risk modelling
Austrian bank hopes switch away from AMA to temper requirements’ sensitivity to legal provisions
Op risk data: Cerberus fight bites $850m off CIBC
Also: SEC targets dodgy disclosures; Commerzbank’s Wirecard hit. Data by ORX News
ING’s op RWAs climb 7% on AMA update
Second quarterly rise in a row erases most of the reduction in the first half of 2022
Ion: after the hack, the clean-up
Some clients now using Ion systems again, but synchronising data with CCPs could take days
Ion cyber outage continues as banks use workarounds
ABN Amro, Macquarie, RBC among firms hit; ransom deadline tomorrow, but service may be down for days
Op risk data: Wells Fargo walloped to the tune of $1.7bn
Also: AML breaches at Danske and Santander; Russia’s Radiotechbank scammed. Data by ORX News
Court allows lawsuit against Credit Suisse to proceed
Shareholder alleges board and senior execs breached fiduciary duties by failing to oversee risk
Financial firms rethink after cyber insurance premium spike
Brokers say there are signs pressure is easing, but quantum hacking threat could transform market
Machine learning for categorization of operational risk events using textual description
The authors summarise ways that machine learning can help categorize textual descriptions of operational loss events into Basel II event types.
Op risk data: SEC skewers Goldman for specious ESG claims
Also: FTX hacked; Aussie banks schooled for credit insurance mis-sales; more on Glencore. Data by ORX News
Systemic operational risk in the Australian banking system: the Royal Commission
The author investigates the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and its most prominent cases, as well as detailing examples of operational risk events that the commission did not cover.