Search Results

Showing results 1 to 10 of approximately 11.

(refine search)
Keywords:operational risk OR Operational risk OR Operational Risk 

Discussion Paper
Coming to Terms with Operational Risk

The term ?operational risk? often evokes images of catastrophic events like hurricanes and earthquakes. For financial institutions, however, operational risk has a broader scope, encompassing losses related to fraud, rogue trading, product misrepresentation, computer and system failures, and cyberattacks, among other things. In this blog post, we discuss how operational risk has come into greater focus over the past two decades?to the point that it now accounts for more than a quarter of financial institutions? regulatory capital.
Liberty Street Economics , Paper 20190107

Working Paper
Benchmarking Operational Risk Stress Testing Models

The Federal Reserve?s Comprehensive Capital Analysis and Review (CCAR) requires large bank holding companies (BHCs) to project losses under stress scenarios. In this paper, we propose multiple benchmarks for operational loss projections and document the industry distribution relative to these benchmarks. The proposed benchmarks link BHCs? loss projections with both financial characteristics and metrics of historical loss experience. These benchmarks capture different measures of exposure and together provide a comprehensive view of the reasonability of model outcomes. Furthermore, we employ ...
Finance and Economics Discussion Series , Paper 2019-038

Working Paper
Predicting Operational Loss Exposure Using Past Losses

Operational risk models, such as the loss distribution approach, frequently use past internal losses to forecast operational loss exposure. However, the ability of past losses to predict exposure, particularly tail exposure, has not been thoroughly examined in the literature. In this paper, we test whether simple metrics derived from past loss experience are predictive of future tail operational loss exposure using quantile regression. We find evidence that past losses are predictive of future exposure, particularly metrics related to loss frequency.
Finance and Economics Discussion Series , Paper 2016-2

Working Paper
Forward-looking and Incentive-compatible Operational Risk Capital Framework

This paper proposes an alternative framework to set banks? operational risk capital, which allows for forward-looking assessments and limits gaming opportunities by relying on an incentive-compatible mechanism. This approach would improve upon the vulnerability to gaming of the AMA and the lack of risk-sensitivity of BCBS?s new standardized approach for operational risk.
Finance and Economics Discussion Series , Paper 2017-087

Working Paper
Benchmarking Operational Risk Models

The 2004 Basel II accord requires internationally active banks to hold regulatory capital for operational risk, and the Federal Reserve's Comprehensive Capital Analysis and Review (CCAR) requires banks to project operational risk losses under stressed scenarios. As a result, banks subject to these rules have measured and managed operational risk more rigorously. But some types of operational risk - particularly legal risk - are challenging to model because such exposures tend to be fat-tailed. Tail operational risk losses have significantly impacted banks' balance sheets and income ...
Finance and Economics Discussion Series , Paper 2016-070

Welcome remarks at First New York Fed Fintech Conference, Federal Reserve Bank of New York, New York City

Remarks at the First New York Fed Fintech Conference, Federal Reserve Bank of New York, New York City.
Speech , Paper 312

The importance of addressing cybersecurity risks in the financial sector

Remarks at the OpRisk North America Annual Conference, New York City.
Speech , Paper 160

A general approach to integrated risk management with skewed, fat-tailed risks

The goal of integrated risk management in a financial institution is to measure and manage risk and capital across a range of diverse business activities. This requires an approach for aggregating risk types (market, credit, and operational) whose distributional shapes vary considerably. In this paper, we use the method of copulas to construct the joint risk distribution for a typical large, internationally active bank. This technique allows us to incorporate realistic marginal distributions that capture some of the essential empirical features of these risks-such as skewness and fat ...
Staff Reports , Paper 185

Working Paper
Are the Largest Banking Organizations Operationally More Risky?

This study demonstrates that, among large U.S. bank holding companies (BHCs), the largest ones are exposed to more operational risk. Specifically, they have higher operational losses per dollar of total assets, a result largely driven by the BHCs' failure to meet professional obligations to clients and/or faulty product design. Operational risk at the largest U.S. institutions is also found to: (i) be particularly persistent, (ii) have a counter-cyclical component (higher losses occur during economic downturns) and (iii) materialize through more frequent tail-risk events. We illustrate two ...
Working Papers , Paper 2016

Working Paper
Business complexity and risk management: evidence from operational risk events in U. S. bank holding companies

How does business complexity affect risk management in financial institutions? The commonly used risk measures rely on either balance-sheet or market-based information, both of which may suffer from identification problems when it comes to answering this question. Balance-sheet measures, such as return on assets, capture the risk when it is realized, while empirical identification requires knowledge of the risk when it is actually taken. Market-based measures, such as bond yields, not only ignore the problem that investors are not fully aware of all the risks taken by management due to ...
Working Papers , Paper 16-16


FILTER BY Content Type

Working Paper 7 items

Speech 2 items

Discussion Paper 1 items

Report 1 items

FILTER BY Jel Classification

G21 7 items

G28 5 items

G20 4 items

G32 4 items

G2 2 items

C16 1 items

show more (6)

FILTER BY Keywords