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Operational Risk for Asset Managers

Operational Risk for Asset Managers. Introduction Bruce Offergelt. Basel Definition. “ The risk of loss from inadequate or failed internal processes, people and systems or from external events ”. FSA Rules. Qualitative guidance Senior Management Arrangements, Systems and Controls (SYSC)

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Operational Risk for Asset Managers

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  1. Operational Risk for Asset Managers Introduction Bruce Offergelt

  2. Basel Definition • “The risk of loss from inadequate or failed internal processes, people and systems or from external events”

  3. FSA Rules • Qualitative guidance • Senior Management Arrangements, Systems and Controls (SYSC) • Integrated Prudential Sourcebook (PRU) • Quantitative requirement • - prudential capital adequacy requirements to be finalised

  4. Qualitative Policy Timetable • Feedback on CP142 issued March 2003 • Near-Final Handbook Text later 2003 • Implementation 2004 (12 months later)

  5. Capital Adequacy Framework • Risk Based • Income used as proxy for Operational Risk • Capital Requirement = Income x Risk Calibration Factor • 3 approaches • Basic Indicator • Standardised • Advanced Management Approach (AMA)

  6. Quantitative Timetable • Basel CP3 May 2003 • EU CAD3 June 2003 • FSA CP on Implementation July 2003 • Accord Oct 2003 • Draft PSB Text Mid 2004 • Implementation End 2006

  7. Issues • Criteria • Calibration Factors • Future role of EBR • Incentivisation • Partial Use • Role of Insurance

  8. Next Steps • Publication of CP3 and EU CAD3 • Data collection for asset managers

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