Hitting the headlines

  • 28 October 2016

Public operational risk losses in the banking sector (2014-15)

This report analyses the frequency and severity of losses in the financial services industry across 2014 and 2015. The analysis uses data from the ORX News database, which collects information about loss events reported in the media.

Hitting the headlines gives insight and context to the data, exploring recent developments affecting the industry and potential areas for concern in the future. Read some of the key findings and download the full report below.

Severity decreasing

The severity of operational risk losses reported in 2015 was less than in 2014. We attributed this to a fall in the number and extent of fines and payments for the mis-selling of various banking products. The legal fallout connected to the early years of the financial crisis appears to be receding.

“While it is a welcome development that aggregated losses fell by almost 50% last year, one has to acknowledge that 2014 included some exceptionally large losses. The number and extent of the fines, compensation and settlement payments relating to the mis-selling of various derivative products decreased in 2015. This explains some of the lower average severity observed during the last year.” Annika Westphal, ORX Researcher

Regional differences

The report showed that different regions are affected to varying degrees by different types of events. The most common losses in Africa, Eastern and Western Europe were internal fraud events. North America saw the highest number of unauthorised activity losses, while institutions in Latin America and the Caribbean were hit by a high number of losses caused by improper business and market practices.

 

 

Business Lines with the highest aggregated loss in each country in 2015

Map of Business Lines with the highest aggregated loss in each country in 2015

Largest losses

The commercial banking and retail banking sectors experienced the largest aggregate losses in 2015. Most of these retail banking losses occurred in Europe, while most of the commercial banking losses happened in the Asia/Pacific region.

ORX also produces a sister report that looks at the data in our Global Banking Database – have a look at Beyond the headlines.

Read more

Hitting the headlines

Download the full report for more in-depth analysis of public risk losses in 2014 and 2015.