Forward-Looking and Incentive-Compatible Operational Risk Capital Framework

16 Pages Posted: 8 May 2018

Multiple version iconThere are 4 versions of this paper

Date Written: April 23, 2018

Abstract

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.

Keywords: Banking Regulation, Operational Risk, Regulatory Capital, Incentive Compatibility

JEL Classification: G21, G28, G32

Suggested Citation

Migueis, Marco, Forward-Looking and Incentive-Compatible Operational Risk Capital Framework (April 23, 2018). Available at SSRN: https://ssrn.com/abstract=3159608 or http://dx.doi.org/10.2139/ssrn.3159608

Marco Migueis (Contact Author)

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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