The significance of financial institution’s operational risk is increasing as the surroundings of financial institution is rapidly changing. In response, the BCBS decided to charge capital against operational risk in its proposal for new capital accord.
At the moment, best practices for managing operational risk are being developed by leading banks and some methods for measuring operational risk are being developed, too.
I outlined the definition of operational risk, best practices for managing it and various methods for measuring it. And I surveyed the current practices for operational management of domestic commercial banks.
Based on this survey, I suggest domestic banks use the standard approach for the purpose of deciding capital requirements. To qualify the use of
standardized approach, some enhancement for operational risk management is needed.
