The Regulation Of Operational Risk In Investment Management Companies
- Topics:
- Enterprise Risk Management
- Source:
- Investment Company Institute
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Overview: Operational risk in financial organizations has become a focal point for regulation. The term itself refers to potential causes of loss arising from deficiencies in internal controls, human errors, physical systems failures, and other business execution risks as well as external events. Thus far, the regulatory response has largely favored minimum capital requirements as the means of controlling operational risk. In particular, the proposed New Basel Capital Accord would apply this approach to banks and banking organizations. In addition, the European Union is considering imposing the Basel operational risk capital requirements on investment management companies and other nonbank financial institutions operating in Europe. This paper is principally concerned with the extension of capital standards for operational risk to investment management companies. In particular, it argues that minimum capital requirements are not the appropriate method for regulating operational risk in investment management companies or, for that matter, banks.
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Format: PDF | Size: 237KB | Date: Sep 2002 | Pages: 20
