In order to cope with the operational risk resulting from drastic changes of financial market and diversified financial products (e.g. product design, training for sales personnel, risk management, etc.), Basel Committee on Banking Supervision¡]BCBS¡^decided that, under the minimum capital requirement, the banking groups are requested to increase the operational risk capital requirement, which will be implemented in the banking business by the end of 2006.
The operational risk, defined by Basel Committee on Banking Supervision¡]BCBS¡^is ¡§the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events¡¨. Although the scope of the operational risk has been narrowed down, the definition is still ambiguous to the banking groups. The operational risk needs to be clearly distinguished from the credit risk and the market risk such that categorization and quantification of the banking business can be realized. In fact, besides the natural disasters and irresistible causes, most of operational risk results from the failure of internal control and policy execution rather than from causes of systemic risks. Therefore, it is inappropriate to apply the same risk coefficient to the banking groups without taking their operation quality and scale into consideration.
It is also questionable that the capital requirement can entirely offset the financial loss caused by the operational risk. In order to minimize the loss from the operational risk, risk mitigation should be applied. The strategy is to collect the historical data and information to establish a database, which is commonly found in the following four approaches in performing the operational risk capital requirement¡GBasic Indicator Approach ¡]BIA¡^, Standardized Approach¡]SA¡^, Alternative Standardized Approach¡]ASA¡^, Advanced Measurement Approaches¡]AMA¡^. Hence, it is inevitable that the banking groups need to invest substantial amount of manpower and capital, which could become a huge burden to the banking groups but is the price to pay to arouse the banking groups¡¦ attention to reinforce the risk management and evaluation.
Establishment of the systems and execution of the policies will not always be impeccable and there will always be room for discussion and modification. Nevertheless, the ultimate goal for the management is to well-operate the banking groups and maximize the shareholders benefit.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0620106-144402 |
| Date | 20 June 2006 |
| Creators | Chuang, Shin-Hsiung |
| Contributors | David Shyu, Ming-Rea Kao, C.M. Chen |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | Cholon |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0620106-144402 |
| Rights | unrestricted, Copyright information available at source archive |
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