32 Pages Posted: 29 Apr 2003
Date Written: April 2003
Management and quantification of operational risk has been impeded by the lack of internal or external data on operational losses. We consider newly available data collected from public information sources, and show how such data can be used to quantify operational risk for large internationally active banks. We find that operational losses are an important source of risk for such banks, and that the capital charge for operational risk will often exceed the charge for market risk. Although operational risk capital will vary depending on the size and scope of a bank's activities, our results are consistent with the 2-7 billion dollars in capital some large internationally active banks are currently allocating for operational risk.
Keywords: Banking, Operational Risk, Basel II, Regulatory Capital, Extreme Value Theory
JEL Classification: G2
Suggested Citation: Suggested Citation
de Fontnouvelle, Patrick and De Jesus-Rueff, Virginia and Jordan, John S. and Rosengren, Eric S., Using Loss Data to Quantify Operational Risk (April 2003). Available at SSRN: https://ssrn.com/abstract=395083 or http://dx.doi.org/10.2139/ssrn.395083