Document Type

Working Paper

Abstract

Using novel, proprietary data on operational losses from a large government-owned bank in India, we provide evidence that only 3% operational risk events (particularly external frauds) account for more than 80% of aggregate operational losses. Operational losses are power-law distributed and exhibit steep increases in their tail operational value-at-risk. We also show that extreme operational losses in a given year are driven mostly by the previous year’s NPL (non-performing loan) level, with a one standard deviation rise in NPLs associated with about a 1% rise in extreme operational losses

Publication Date

1-1-2024

Publisher

Indian Institute of Management Bangalore

Relation

IIMB Working Paper-696

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