Principles of Proportionality in Credit Institutions’ Operational Risk Management

Norbert Kozma ()
Additional contact information
Norbert Kozma: Magyar Nemzeti Bank

Financial and Economic Review, 2020, vol. 19, issue 3, 78-101

Abstract: Operational risk is a natural risk inherent in credit institutions’ activity, and the scope of this risk is becoming increasingly broad. In parallel with banking practices, supervisory authorities have continuously attempted to identify potential risks and ensure that the capital requirement provides sufficient cover for them. In the practical implementation of this, the regulation regards proportionality as a fundamental principle; however, the interpretation and implementation of this into supervisory practice encounters difficulties. Relying on a wide-ranging analysis of operational risk management applied by small, medium-sized and large banks, this paper provides assistance in the proper application of the principle of proportionality, although it cannot undertake to resolve the dilemmas related to the principles of proportionality. In addition, it contributes to the improvement of the operational risk framework and thereby to reducing the range of continuously growing natural risks, based on the analysis of Hungarian credit institutions’ data, the analysis of the EU regulatory and Hungarian supervisory requirements and an assessment of credit institutions’ practices.

Keywords: banking regulation; operational risk; principles of proportionality; supervision (search for similar items in EconPapers)
JEL-codes: G21 G32 L25 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://en-hitelintezetiszemle.mnb.hu/letoltes/fer-19-3-st3-kozma.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mnb:finrev:v:19:y:2020:i:3:p:78-101

Access Statistics for this article

More articles in Financial and Economic Review from Magyar Nemzeti Bank (Central Bank of Hungary) Contact information at EDIRC.
Bibliographic data for series maintained by Morvay Endre ( this e-mail address is bad, please contact ).