Annual Banking Loss Report 2018
- 5 July 2018
Every year ORX produces a high-level summary of our global banking operational loss database. Currently our database includes 630,000 loss events, which continues to grow as we expand our membership. This year we have also produced our second global insurance loss report, which examines trends in over €3.7bn of gross operational loss. You can find out more about the insurance report here.
ORX Global Banking Service
Established in 2002, the ORX global banking service was created to provide the banking industry with a platform for data sharing. By 2018, we had grown to 83 banking members from around the globe, including a good proportion of the world's largest financial institutions.
This growth has enabled ORX to expand its scope to offer insurance, news and scenario services, making ORX the largest operational risk association in the financial sector.
This is the eighth annual report on the ORX banking operational risk loss database. It summarises our database and illustrates trends in operational risk losses within the banking industry. This edition of the report is based on €170bn of gross loss recorded between 1 January 2012 and 31 December 2017.
Following a post-crisis period where operational losses appeared to be stabilising, 2017 sees a large decrease in industry operational loss.
The average size of a loss event in 2017 was €206.426, which is less than a third of the average loss in 2012. As a proportion of gross income, this equates to €0.82 lost per €100 in 2017, which is less than a quarter of 2012's figure of €3.66. This is partly due to a fall in the size of the largest industry losses.
Between the years of 2012 and 2017, the frequency of loss events submitted per year remains relatively stable with approximately 60,000 loss events.
Focusing on operational loss events in 2016 and 2017, the figure below illustrates the change in global distribution of frequency and severity of losses reported in 2017 (and, in brackets, 2016).
The frequency of loss events in 2016 and 2017 remains relatively stable across the globe.
In comparison to 2016, loss severity experienced in 2017 across North America and Western Europe appears to be decreasing, while other regions remain relatively stable.
The geographic distribution of loss is indicative of both the ORX membership, but also of jurisdictional differences.
Event and business line breakdown
Although event frequency was the highest for the Execution, Delivery and Process Management event type, Clients, Products and Business Practices accounted for the largest proportion of loss.
The decrease in operational loss was experienced in both the core banking business, as well as the trading and investment business line.