In a setting where private information goes public for the first time, we study the real effects of the Basel II Accord requiring banks to calculate operational risk capital, and disclose qualitative and quantitative information. Using a difference-in-differences setup featuring partial US...

This paper analyses key documents of Basel Committee which concern operational risk governance and identifies the interconnectedness between risk source, type of the event leading to losses, loss type and its distribution by business lines. The comparative characteristic of the main operational...

Regulations leading up to the financial crisis of 2007-2009 provided incentives for banks shift their risk profiles toward less regulated areas. We focus on the case of operational risk which went from being a relatively benign and largely unregulated risk type to a major risk that now accounts...

Following the three-pillar structure of the Basel II/III framework, the article categorises and surveys 279 academic papers on operational risk in financial institutions, covering the period from 1998 to 2014. In doing so, different lines of both theoretical and empirical directions for research...

Operational risk constitutes a large portion of a bank’s risk exposure. Unlike other financial risks, operational risk is classified as a pure risk (only an opportunity of a loss), as it always leads to a financial loss for a bank. The failure to mitigate and manage operational risk...

This paper conducts an empirical analysis with regard to those methodologies proposed by the Basle Committee for the estimation of the operational capital charge. More specifically, we compare an advanced measurement approach, as the Loss Distribution Approach (LDA), versus the so called...

In an effort to bolster soundness standards in banking, the 2006 international regulatory agreement of Basel II requires globally active banks to include operational risk in estimating regulatory and economic capital to be held against major types of risk. This paper discusses practical issues...

We propose a new approach that reconciles traditional working capital management with risk management principles. By extending the traditional working capital approach, we develop a risk-adjusted working capital model. We examine the determinants of working capital for Australian firms over the...

Operational risk events in banks include extreme events with significant losses being incurred and with substantial impact on share prices. A pooling arrangement between banks that would be able to reduce overall costs and reduce share price impacts would seem desirable, but one of the major...

Operational risk is fundamentally different from all other risks taken on by a bank. It is embedded in every activity and product of an institution, and in contrast to the conventional financial risks (e.g. market, credit) is harder to measure and model, and not straight forwardly eliminated...