Part IV Other Risks, 19 Operational Risk Requirements
- Regulation of banks — Basel 2
19.01 Operational risk is the ‘risk of loss resulting from inadequate or failed internal processes, people and systems or from external events’. 19.02 The key to understanding the operational risk charge is to distinguish between it and the Pillar two charge. The Pillar two charge is intended to constitute, inter alia, an assessment by the regulators of the effectiveness of the control systems within the bank. The operational risk charge is intended to be a quantification of the effectiveness of the bank's systems. Put simply, Pillar two assesses the risk that the...