The Basle Committee releases paper on operational risk management

Managing operational risk is becoming an important feature of sound risk management practice in modern financial markets. The Basle Committee on Banking Supervision is today making public a summary of the results of recent interviews with major banks in the G-10 countries on their management of operational risk. The purpose of these interviews was to assess the current state of art of operational risk management.

The survey results indicate that, while senior management's awareness of operational risk has been increasing, most banks are only in the early stages of developing a framework for measuring and monitoring operational risk. Mr. William J. McDonough, Chairman of the Basle Committee and President of the Federal Reserve Bank of New York, stated that "the Basle Committee intends to continue monitoring developments in this area of risk management and encourages banks to share with their supervisors the development of new techniques to identify, measure, manage and control operational risk."

The survey was conducted by the Basle Committee's Risk Management Subgroup, which is chaired by Mr. Roger Cole, Associate Director at the Board of Governors of the Federal Reserve System and Ms. Christine Cumming, Senior Vice President at the Federal Reserve Bank of New York. In presenting the paper, Ms. Cumming noted that "although the issue of Year 2000 readiness is not specifically addressed in this paper, many banks we talked with mentioned that the Year 2000 is a very important focus of their current work on operational risk."

The text of this report can be obtained from the BIS Web Site on the Internet at http://www.bis.orgas of 22nd September 1998 at 12.00 BST.

22nd September 1998