Comparison To Operational Risk Considerations in The Context of Banks' Prudential Capital Requiremen
Much of the literature associated with ODD, particularly the academic literature, is based on an underlying definition of operational risk that was originally designed in the context of the banking industry and contained within the Basel Accords, which holds that operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events.
The banking industry is, in most economies, subject to regulation by a national financial services supervisory body, for example the Financial Services Authority in the UK, with the regulatory regime including a requirement for banks to hold at least minimum levels of capital designed to withstand the likely incidence of various risks, including operational risks. The capital held by banks for the purpose of meeting the requirements of the relevant regulator(s) is referred to as their capital requirement or prudential capital.
The imperative of considering operational risk in the context of banks is to ascertain an amount in currency which, if maintained by the bank as capital, should (in theory at least) fully compensate for the expected impact of crystallisation of the operational risks faced by the bank. When this “operational risk requirement” is added to the other elements of a bank’s prudential capital requirement (relating to non-operational risks faced by the bank), the resulting total gives the bank’s “total capital requirement”.
Read more about this topic: Operational Due Diligence (alternative Investments)
Famous quotes containing the words comparison to, capital, comparison, context and/or risk:
“In comparison to the French Revolution, the American Revolution has come to seem a parochial and rather dull event. This, despite the fact that the American Revolution was successfulrealizing the purposes of the revolutionaries and establishing a durable political regimewhile the French Revolution was a resounding failure, devouring its own children and leading to an imperial despotism, followed by an eventual restoration of the monarchy.”
—Irving Kristol (b. 1920)
“Bob, its the second night of violence in this normally quiet, yet generally swinging, Casino Capital of the East.”
—John Guare (b. 1938)
“Intolerance respecting other peoples religion is toleration itself in comparison with intolerance respecting other peoples art.”
—Wallace Stevens (18791955)
“The hippie is the scion of surplus value. The dropout can only claim sanctity in a society which offers something to be dropped out ofcareer, ambition, conspicuous consumption. The effects of hippie sanctimony can only be felt in the context of others who plunder his lifestyle for what they find good or profitable, a process known as rip-off by the hippie, who will not see how savagely he has pillaged intricate and demanding civilizations for his own parodic lifestyle.”
—Germaine Greer (b. 1939)
“The married are those who have taken the terrible risk of intimacy and, having taken it, know life without intimacy to be impossible.”
—Carolyn Heilbrun (b. 1926)