Annual Banking Loss Report 2019

  • 24 September 2019

Each year ORX publishes a free report which analyses key trends in the frequency and severity of operational risk loss events in our global banking loss database. Alongside this, we also produce a sister report with similar analyses on the data in our insurance database. This year’s banking report examines the last six years’ worth of data in our database – 2013 to 2018.

Part of our mission is to improve operational and non-financial risk management beyond just our membership. These free reports are just one way in which we provide vital information to op risk professionals around the globe. Explore our free resources section to see what other research, data and information you could be using. Or, for full access to our research, data and expertise, find out how your firm could become a member of ORX.

Download the report for free for the full analysis or continue reading for our highlights and key findings.

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Annual Banking Loss Report 2019

Report highlights

Value and number of op risk losses decreases

In 2018 there was an industry-wide decrease in both total operational risk loss and the frequency of events. We collected 51,135 operational risk loss events with a value of €13.2 billion from our members, compared to an average of €30.5 billion from 2013 to 2016. Between 2016 and 2017 gross loss decreased by 44 per cent to €15.8 billion, and 2018 saw a further decrease of 16 per cent.

The long-running nature of some operational risk losses means that 2018 totals will probably increase over the coming years. However, the evidence does appear to suggest that the post-financial crisis trend of decreasing losses continues.

80% of total gross loss from Banking and Trading & Investment

The banking and trading & investment business lines account for 80% of the total gross loss in the global banking database between 2013 and 2018. The average annual gross loss for banking business lines was €13.6 million, while the average for trading & investment was €6.6 billion.

A breakdown of the Banking and Trading & Investment business lines in the ORX global banking data

Clients, Products and Business Practices events drive total losses

While external fraud and execution-related events remain the most common, total loss is driven by events related to clients, products and business practices (CPBP) due to their higher average impacts. The largest aggregate loss for all business lines (except for agency services and clearing) was due to CPBP, totalling €88 billion from 2013 to 2018.

What does the data tell us about material risks?

In this year's report we decided move beyond the Basel event types for the first time. Using two of the top 10 non-financial risks identified in the 2019 Operational Risk Horizon – cyber and conduct – we’ve analysed the data looking for specific insights.

We’ve identified relevant losses using data mappings based on work done by the ORX definitions working group (DWG) and by participants of our cyber and information security risk programme.

Cyber and information security risk losses average €2.4 million

One of the main challenges of cyber and information security risk (CISR) management is the lack of data that enables the understanding and assessment of this risk type. The Basel event types don’t support the identification of cyber-related incidents, so we’ve been working with experts from our member firms to create a CISR programme to overcome these challenges.

We’ve identified 257 relevant losses with an average loss of €2.4 million in the global banking data between 2013 and 2018. It is no surprise to see that technology and infrastructure failures contributed to more than 90 per cent of the total loss attributable to cyber and information security events.

Explore our work on cyber and information security

Conduct-related losses average €16.2 billion a year

Regulatory focus and large losses from fines and settlements drives industry concern about conduct risk. The average conduct-related annual gross loss was €16.2 billion from 2013 to 2018. The year with the smallest gross loss was 2013 at €6.7 billion. In contrast, 2014 had the highest amount at €26.2 billion, which accounted for 70 per cent of total loss in that year. With losses of €6.7 billion, 2018 had the lowest levels of conduct-related gross loss.

Op risk loss decreases everywhere except North America and Asia Pacific

Geographic distribution of banking losses reported to ORX in 2013 to 2018

In comparison to 2017, gross operational risk loss decreased across all regions in 2018, except for North America and Asia Pacific. In those two regions the levels remained largely unchanged. Annual frequencies, on the other hand, have decreased in all regions.

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Read the full analysis in the free report

Annual Banking Loss Report 2019