Journal of
Italian
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year 100
 

Forum | Papers » Operational risks and small banks: the black swan

Operational risks and small banks: the black swan

Gianfausto Salvadori, Giampaolo Gabbi, Simona Cosma
March 2009 - n°3

Unlike the regulation of the major American and European countries, the new prudential regulation for banks in Italy does not allow the use of advanced methods (AMA) for calculating the capital requirement for operational risk for banks that do not comply with a size and specialist thresholds. These banks can use only the standard method, since they cannot obtain regulatory capital savings stemming from advanced methodologies.Through the analysis of the operational risk losses of a bank that does not comply with the established thresholds, the article demonstrates the existence for this category of intermediaries of an unjustified competitive disadvantages generated by the regulation.The findings stem from a comparison between the bank’s exposure to operational risk calculated using a VaR approach over a holding period of one year at a confidence level of 99,9% and the capital requirement calculated using the standard method.