Advanced Search
MyIDEAS: Login

A loss distribution model for operational risk derived from pooled bank losses

Contents:

Author Info

  • Sodhi, ManMohan

    ()
    (Cass Business School, City University London)

  • Holland, Wayne

    ()
    (Cass Business School, City University London)

Registered author(s):

    Abstract

    The Basel II accord encourages banks to develop their own advanced measurement approaches (AMA). However, the paucity of loss data implies that an individual bank cannot obtain a probability distribution with any reliability. We propose a model, targeting the regulator initially, by obtaining a probability distribution for loss magnitude using pooled annual risk losses from the banks under the regulator’s oversight. We start with summarized loss data from 63 European banks and adjust the probability distribution obtained for losses that go unreported by falling below the threshold level. Using our model, the regulator has a tool for understanding the extent of annual operational losses across all the banks under its supervision. The regulator can use the model on an ongoing basis to make comparisons in year-on-year changes to the operational risk profile of the regulated banking sector.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.capco.com/files/pdf/1094/02_Part%202/09_A%20loss%20distribution%20for%20operational%20risk%20derived%20from%20pooled%20bank%20losses.pdf
    File Function: Full text
    Download Restriction: no

    Bibliographic Info

    Article provided by Capco Institute in its journal Journal of Financial Transformation.

    Volume (Year): 25 (2009)
    Issue (Month): ()
    Pages: 155-160

    as in new window
    Handle: RePEc:ris:jofitr:0868

    Contact details of provider:
    Postal: 120 Broadway, 29th Floor New York, NY 10271
    Phone: +1 212 284 8600
    Email:
    Web page: http://www.capco.com/

    Related research

    Keywords: loss model; operational risk; advanced measurement approaches (AMA); Basel II; pooled loss data; Pareto distribution;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ris:jofitr:0868. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Springett).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.