Modeling the operational risk in Iranian commercial banks: case study of a private bank

Subject Areas : Mathematical Optimization

Omid Momen ¹ , Alimohammad Kimiagari ² , Eaman Noorbakhsh ³

1 - Karafarin Bank, Tehran, Iran|Amirkabir University of Technology, Tehran, Iran
2 - 2Amirkabir University of Technology, Tehran, Iran
3 - Karafarin Bank, Tehran, Iran

Received: 2020-10-01 Accepted : 2020-10-01 Published : 2012-01-01

Keywords: Operational Risk, Bank, COPULA, Loss distribution approach,

Abstract :

The Basel Committee on Banking Supervision from the Bank for International Settlement classifies banking risks into three main categories including credit risk, market risk, and operational risk. The focus of this study is on the operational risk measurement in Iranian banks. Therefore, issues arising when trying to implement operational risk models in Iran are discussed, and then, some solutions are recommended. Moreover, all steps of operational risk measurement based on Loss Distribution Approach with Iran's specific modifications are presented. We employed the approach of this study to model the operational risk of an Iranian private bank. The results are quite reasonable, comparing the scale of bank and other risk categories.