The Basel Committee on Banking Supervision released a paper today describing the range of industry practices concerning operational risk management under Basel II.

The paper describes a cross-section of the practices supervisors have observed in relation to some of the key challenges in the operational risk-related work of banks targeting the Advanced Measurement Approaches. The practices described in the paper are grouped into three broad subject areas: internal governance, data and modeling.

Nout Wellink, chairman of the Basel Committee and president of the Netherlands Bank, said, “The management and measurement of operational risk are relatively new and rapidly evolving areas in the field of risk management. Little information is publicly available concerning industry practice in these areas. This paper represents an effort to address that information gap.”

Nick Le Pan, the outgoing chairman of the Basel Committee’s Accord Implementation Group and Superintendent of Financial Institutions in Canada, added, “Sharing supervisory experience with, and knowledge about, industry practice in areas such as operational risk management will help to promote the successful implementation of Basel II. As such, this paper should be of great interest to supervisors and banks alike.”

The paper was prepared by the Operational Risk Subgroup of the Accord Implementation Group using information obtained from members’ supervisory work, benchmarking exercises, discussions with banks’ management and other sources.