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New Experiences from Voluntary Risk Disclosures. Operational Risk in Nordic Banks

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  • Magnus Willesson

Abstract

Basel II simultaneously introduced a regulatory framework for operational risk and shifted the regulatory focus from top-down to bottom-up governance, prompting increased reliance on self-evaluation and market discipline. In this paper we assess the relevance of market discipline to regulation of operational risk and the implications of voluntary disclosure. We study the development, determinants and quality of operational risk disclosure in the Nordic banking sector following the implementation of Basel II. Our results reveal that the extent of disclosure has increased and that size is the main determinant. However, the quality of operational risk disclosure is poor and it does not assist stakeholders' evaluation of banks' operational risk. Based on our results, we discuss whether disclosure studies can capture quality in terms of content, the impact of regulation on banks of different sizes and whether market discipline is an effective regulatory effort to reduce bank risk.

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  • Magnus Willesson, 2014. "New Experiences from Voluntary Risk Disclosures. Operational Risk in Nordic Banks," Journal of Financial Management, Markets and Institutions, Società editrice il Mulino, issue 1, pages 105-126, July.
    • Handle: RePEc:mul:jdp901:doi:10.12831/77239:y:2014:i:1:p:105-126
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    1. Sinemis Zengin & Serhat Yuksel, 2016. "A Comparison of the Views of Internal Controllers/Auditors and Branch/Call Center Personnel of the Banks for Operational Risk: A Case for Turkish Banking Sector," International Journal of Finance & Banking Studies, Center for the Strategic Studies in Business and Finance, vol. 5(4), pages 10-29, July.

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