Capital and Risk: New Evidence on Implications of Large Operational Losses
AbstractOperational risk is currently receiving significant media attention, as financial scandals have appeared regularly and multiple events have exceeded one billion dollars in impact. Regulators have also been devoting attention to this risk and are finalizing proposals that would require banks to hold capital for potential operational losses. This paper uses newly available loss data to model operational risk at internationally active banks. Our results suggest that the amount of capital held for operational risk will often exceed capital held for market risk and that the largest banks could choose to allocate several billion dollars in capital to operational risk.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 38 (2006)
Issue (Month): 7 (October)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
Other versions of this item:
- Patrick de Fontnouvelle & Virginia DeJesus-Rueff & John Jordan & Eric Rosengren, 2003. "Capital and risk: new evidence on implications of large operational losses," Working Papers 03-5, Federal Reserve Bank of Boston.
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