Basel’s ‘99.9% standard’ for op risk is unreliable, says ORX chief
The thousand-year standard set for operational risk capital calculation by the Basel II capital rules is fundamentally flawed and misleading, the OpRisk Europe conference in London heard today.
Giulio Mignola, chairman of the ORX operational risk loss data consortium and head of operational risk at Intesa Sanpaolo, pointed out that observed operational risk loss data was "heavy-tailed" and tended to be dominated by one or a few very large low-frequency losses. This meant that the 99.9% standard
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