September 6, 2007
Planning and Coordination Bureau, Financial Service Agency
Financial Systems and Bank Examination Department, Bank of Japan

Results of the 2007 Operational Risk Data Collection Exercise

Outline of the Exercise

(1)  Background

This exercise was conducted jointly by the Financial Service Agency (FSA) and the Bank of Japan (BOJ). Participation in this exercise was voluntary. It requested information on operational risk data (internal loss data and scenario data) from 14 banks (including bank holding companies) that use or plan to use internal loss data for the calculation of operational risk capital. Note that this paper refers only to the internal loss data (it does not refer to the scenario data, partly because the number of scenarios collectively was not large enough.) The data were submitted to the FSA and BOJ through February 2007.

The exercise had several purposes, including assisting the FSA and BOJ in understanding the operational risk profiles of Japanese banks and their progress in operational risk data collection. At the same time, we believe that sharing the result of the exercise among financial institutions will assist them in enhancing their collection, analysis and evaluation of operational risk data.

This was the first operational risk data collection exercise targeting Japanese banks. Similar exercises were conducted by the Basel Committee, targeting financial Institutions from G10 countries including Japanese banks and by the U.S. regulators, targeting financial institutions with a presence in the U.S. The methodology and the format presenting the results in this paper was designed after the U.S. exercise, thus enabling comparisons almost on the same basis.

(2)  Scope of the Exercise

The exercise requested the following two types of information: (a) internal loss data and (b) scenario data (See the questionnaire for the detail «appendix»). As mentioned above, this paper refers only to internal loss data.

(a) Internal Loss Data
The participating banks were asked to provide detailed data on operational losses. This information included the loss amount (net / gross), the date of the loss (date of occurrence and date of discovery), associated business lines and types of occurrences. All loss data were requested with no specific loss threshold and with no standard time period.
(b) Scenario Data
The participating banks were asked to provide information on each of their major operational risk scenarios the frequency, loss amount, associated business line and event type and a simple description of the scenario.

(3)  Participants

Fourteen banks, including bank-holding companies, participated in this exercise. All of them provided data on individual losses of more than one yen, and some provided data on individual losses of zero yen (near misses) or losses of less than zero yen (misses that brought about an unexpected profit). Nine banks provided their scenario data.

Contact

FSA Shinichiro Shimizu 81-3-3506-6188
BOJ Tsuyoshi Ooyama 81-3-3277-3018
Tsuyoshi Nagafuji 81-3-3277-2987

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