Similarities and differences between the operational risk covered by Basel III and Solvency II and trends in this area

Laurențiu Paul Barangă
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Laurențiu Paul Barangă: Bucharest University of Economic Studies, Romania

Theoretical and Applied Economics, 2016, vol. XXIII, issue Special(I), 19-28

Abstract: Operational risk is a very complex, qualitative or subjective area and so it is very difficult to find a standard formula that reflects the operational risk to a financial entity that would be relevant across jurisdictions and across business areas. Of the two models of standardized approaches for assessing the capital requirement for operational risk, the model presented and implemented by the Basel framework 12 years ago does not include weaknesses which were revealed during the financial crisis. This is all more worrying as in recent years by implementing EMIR and other European / national regulations this methodology for the measurement of the capital charge for operational risk has been extended to other categories of financial entities, some of them having a important role in financial markets architecture because it provides clearing and settlement of financial transactions and / or securities registry activity. Although in recent years the Basel Committee has conducted a series of analyzes to improve the methodology for the measurement of the capital charge for operational risk these analyzes were conducted on data and characteristics relating to banking activity. Taking consideration on this aspect, the new model for measurement of capital requirement for operational risk is not opportune for other financial entities that use Basel framework.

Keywords: operational risk; Basel framework; Solvency framework; banks; insurance company. (search for similar items in EconPapers)
Date: 2016
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