Understanding the Operational Risk Profile of Banks: An Empirical Analysis

24 Pages Posted: 9 Oct 2012

See all articles by Eric Lamarque

Eric Lamarque

affiliation not provided to SSRN

Hazem Karfoul

Central Bank of Syria

Date Written: June 6, 2012

Abstract

In the last ten years, operational risk has received a considerable attention from banking supervisors, practitioners and researchers alike. While the majority of studies have been devoted to derive the appropriate formulas for quantifying this risk (i.e. under pillar I of Basel II), less has been done to bring the so-called “operational risk profile” into scrupulous analysis. In this paper, we attempt to provide a better understanding of how the bank’s exposure to operational risk responds to changes brought into her operational risk profile. Using data collected from 16 large internationally active banks, our model shows a higher performance compared to previous studies. We find that operational loss amounts are more likely to increase when banks increase the number of employees per business unit, of customers, of geographic presence, and the volume of treated assets per employee, but decrease when banks increase their investments in information technology and the volume of treated assets per business unit.

Keywords: Operational risk, Bank

Suggested Citation

Lamarque, Eric and Karfoul, Hazem, Understanding the Operational Risk Profile of Banks: An Empirical Analysis (June 6, 2012). 29th International Conference of the French Finance Association (AFFI) 2012. Available at SSRN: https://ssrn.com/abstract=2083638 or http://dx.doi.org/10.2139/ssrn.2083638

Eric Lamarque (Contact Author)

affiliation not provided to SSRN ( email )

Hazem Karfoul

Central Bank of Syria ( email )

Syria

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