What is an operational loss event?

An operational loss event is defined as an event that results in loss and is associated with any of the seven operational loss event type categories (Level 1) identified in Appendix A. a) Operational loss events captured in the institution’s loss database during the current reporting quarter.

What are Basel risk categories?

The Basel I classification system groups a bank’s assets into five risk categories, classified as percentages: 0%, 10%, 20%, 50%, and 100%. A bank’s assets are placed into a category based on the nature of the debtor.

What are the three types of operational risk events?

Operational risk can occur at every level in an organisation. The type of risks associated with business and operation risk relate to: • business interruption • errors or omissions by employees • product failure • health and safety • failure of IT systems • fraud • loss of key people • litigation • loss of suppliers.

How are operational risks defined by the Basel Committee?

However, spectacular failures, like Baring’s, have attracted the attention of regulators on the need to provide banks with prevention and coverage mechanisms against operational risks (through the allocation of dedicated capital).

How are loss events classified under Basel II?

Escrow, depository receipts, securities lending (customers) corporate action According to Basel II (Annex 9 of http://bis.org/publ/bcbs128.pdf ), loss events fall into one of seven categories. These categories are further divided by sub category and activities.

How does the Basel Committee collect loss data?

In addition, the survey asks for quarterly aggregate loss data grouped by various business line/loss type combinations. To facilitate the collection of comparable loss data at both the granular and aggregate levels across banks, the Committee has developed a detailed framework for classifying losses.

When does Basel III 1 come into effect?

Effective January 2023, following a one year deferral due to the COVID-19 pandemic, Basel III 1 aims to build upon the previous two Basel accords to strengthen regulation, risk management, supervision and stability within the banking industry.