Capital Requirements For Operational Risk: An Incentive Approach
This paper proposes a simple continuous time model to analyze capital charges for operational risk. We find that undercapitalized banks have less incentives to reduce their operational risk exposure. We view operational risk charge as a tool to reduce the moral hazard problem. Our results show, that only Advanced Measurement Approach may create appropriate incentives to reduce the frequency of operational losses, while Basic Indicator Approach appears counterproductive.
|Date of creation:||20 Jul 2010|
|Date of revision:|
|Note:||View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00504163|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
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- Stolz, Stéphanie, 2002. "The Relationship between Bank Capital, Risk-Taking, and Capital Regulation: A Review of the Literature," Kiel Working Papers 1105, Kiel Institute for the World Economy (IfW).
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