Operational Risk Data Collection Exercise - 2002

In May 2001, the Basel Committee on Banking Supervision launched a survey of banks' operational risk data. In a repeat of this exercise, the Committee is now seeking to collect detailed data from the banking sector on operational risk for the most recent financial year (2001). The data collection exercise will include information on banks' operational risk losses and various `exposure indicators', and will enable the Committee to further refine the calibration of the operational risk charge proposed for the New Basel Accord.

The Committee is providing banks with spreadsheets outlining the operational risk information requested as well as detailed instructions to assist banks in completing the survey. Banks are asked to complete and return the survey, via national supervisors, by 31 August 2002.1

Please note that all data received will be treated with complete confidentiality. The Committee intends to provide feedback to the industry on the results of the survey. However, this will be done on a basis that avoids any disclosure of individual bank data.

Background

The Committee's paper Working Paper on the Regulatory Treatment of Operational Risk published in September 2001 provides an overview of the proposed framework for the regulatory capital charge for operational risk.2 In the working paper, the Committee outlines proposals for the development of a capital charge to cover operational risk. In the proposals there are three approaches of increasing sophistication to assess the operational risk charge: the Basic Indicator Approach, the Standardised Approach and the Advanced Measurement Approaches (AMA).

As part of the second quantitative impact survey, the Committee conducted its first survey of operational risk data in May 2001.3 The data collected in that survey and in this current exercise will allow for the further calibration of the Basic Indicator and Standardised Approaches, and will inform the development of the AMA framework, in particular, resolving issues concerning the qualifying criteria for the AMA. The Committee envisages that these surveys will be part of an on-going data programme undertaken over the next few years to further refine the calibration of the operational risk charge.

The 2002 survey

The primary purpose of this survey is to collect granular (event-by-event) operational risk loss data to help the Committee determine the appropriate form and structure of the AMA. To facilitate the collection of comparable loss data at both the granular and aggregate levels across banks, the Committee is again using its detailed framework for classifying losses. In the framework, losses are classified in terms of a matrix comprising eight standard business lines and seven loss event categories. These seven event categories are then further divided into 20 sub-categories and the Committee would like to receive data on individual loss events classified at this second level of detail if available.

The Committee is also collecting information on six "exposure indicators" such as number of employees or total assets. The exposure indicator data serve two purposes. First, they are critical to the Committee's effort to aggregate loss data across banking institutions to arrive at an industry loss distribution. Second, the exposure indicators are necessary for banks and supervisors to relate historical loss experience to the current level of business activity. This information also enables banks and supervisors to determine separate frequency and severity distributions for the operational risk loss experience. Although indicators other than gross income are included in this survey, the Committee does not envision revisiting the use of gross income as the base for the Basic Indicator and Standardised Approaches.

The survey aims to collect data for the financial year 2001 and banks are asked to complete as much of the survey as possible on a best endeavours basis.

Changes to the previous survey

Although this survey is a repeat of an exercise carried out last year, there are a number of important changes to the scope and content of this year's survey. These include:

  • Banks are no longer asked to provide operational risk loss data by `effect types',
  • Banks are no longer asked to provide quarterly aggregated loss data,
  • Banks are asked to provide data on expected as well as received recoveries,
  • Banks are asked to indicate the internal threshold used for collecting loss data,
  • Banks are asked to identify those losses arising from a `corporate centre' business,
  • Banks are no longer asked to provide data on the value of transactions/deals/trades, the number of transactions/deals/trades, the standard deviation of transactions/deals/ trades, the number of accounts and the average balance of accounts,
  • Banks are asked to provide component information on gross income,
  • Simplified, structured Excel spreadsheets have been developed for completing this year's survey. These spreadsheets include a number of tests to check the consistency of data submitted and thus reduce the need for further enquiries after data are submitted. It is therefore important that banks do not change the design or structure of the questionnaire and check the messages of these tests.

The Committee appreciates that this exercise is a burden on banks. However, it believes, that its proposals will have increased accuracy and risk sensitivity where they are based on a sound quantitative foundation. The data requested are of fundamental importance to the development of the operational risk charge and the calibration of the overall capital framework, and to the extent that more accurate and complete data are received then the need for buffers or adjustments for uncertainty is reduced.

1 Some national supervisors may request data to be submitted to them in advance of the 31 August deadline.

2 The September 2001 Working Paper on operational risk updated proposals set out in the Committee's second consultative package on the New Basel Capital Accord, published in January 2001.

3 See http://www.bis.org/bcbs/qis/qisoprisk.htm. The results of this survey were published in the paper The Quantitative Impact Survey for Operational Risk: Overview of Individual Loss Data and Lessons Learned.

For completing the survey: Download Excel workbook (519 kb)