The Credit Crisis and Operational Risk - Implications for Practitioners and Regulators

Journal of Operational Risk, Vol. 5, No. 2, Summer 2010

21 Pages Posted: 20 Oct 2009 Last revised: 8 Jun 2010

See all articles by Andreas (Andy) Jobst

Andreas (Andy) Jobst

International Monetary Fund (IMF) - European Department

Date Written: May 24, 2010

Abstract

The fallout from the financial crisis has illustrated that many sources of systemic risk were triggered or at least propagated by vulnerabilities in operational risk management (ORM), which has not kept pace with financial innovation, and an excessive focus of regulation on prudential requirements without recognition of substantial operational risk in market-based liquidity transformation. At the same time, institutions are at different stages of systems development and show considerable dispersion in ORM practices while falling short of integrating operational risk as a horizontal process. This is troubling in light of continued regulatory shortcomings. The following article highlights the increased importance of operational risk amid greater systemic risk concerns and reviews the current situation of ORM. In conclusion, it provides some suggestions on the future development ORM – both from an organizational and industry perspective.

Keywords: operational risk, credit crisis, operational risk regulation, systemic risk, systemic liquidity, market infrastructure, re-hypothetication, wholesale funding

JEL Classification: G18, G21

Suggested Citation

Jobst, Andreas A., The Credit Crisis and Operational Risk - Implications for Practitioners and Regulators (May 24, 2010). Journal of Operational Risk, Vol. 5, No. 2, Summer 2010. Available at SSRN: https://ssrn.com/abstract=1491193

Andreas A. Jobst (Contact Author)

International Monetary Fund (IMF) - European Department ( email )

700 19th Street NW
Washington, DC 20431
United States
+1-202-538-2898 (Phone)

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