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Operational and Cyber Risks in the Financial Sector

Author

Listed:
  • Iñaki Aldasoro

    (Bank for International Settlements)

  • Leonardo Gambacorta

    (Bank for International Settlements)

  • Paolo Giudici

    (University of Pavia)

  • Thomas Leach

    (University of Pavia)

Abstract

We use a unique cross-country data set at the loss event level to document the evolution and characteristics of banks’ operational risk. Operational value-at-risk varies substantially—from 6 percent to 12 percent of total gross income—depending on the method used, and shows a growing cyber risk component. It takes, on average, more than a year for operational losses to be discovered and recognized in the books. We show that operational losses depend on macroeconomic conditions and the regulatory environment. Periods of excessively accommodative monetary policy are followed by larger operational losses. Stronger supervision is associated with lower operational losses.

Suggested Citation

  • Iñaki Aldasoro & Leonardo Gambacorta & Paolo Giudici & Thomas Leach, 2023. "Operational and Cyber Risks in the Financial Sector," International Journal of Central Banking, International Journal of Central Banking, vol. 19(5), pages 340-402, December.
    • Handle: RePEc:ijc:ijcjou:y:2023:q:5:a:8
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    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G2 - Financial Economics - - Financial Institutions and Services
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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