Forward-looking and incentive-compatible operational risk capital framework

Marco Migueis

Journal of Operational Risk

Abstract: This paper proposes an alternative framework for setting banks’ operational risk capital, which allows for forward-looking assessments and limits gaming opportunities by relying on an incentive-compatible mechanism. This approach promises to mitigate the vulnerability to gaming of the advanced measurement approach as well as the lack of risk sensitivity of the Basel Committee on Banking Supervision’s new standardized approach for operational risk.

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Persistent link: https://EconPapers.repec.org/RePEc:rsk:journ3:5940086

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