Implementing an AMA for Operational Risk

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Implementing an AMA for Operational Risk

Federal Reserve Bank of Boston
May 18-20, 2005

The conference's primary objective was to provide a forum for discussion of many of the most critical issues related to the upcoming implementation of the Basel II Accord. Discussion topics included regulatory initiatives, such as the Quantitative Impact Study, the Loss Data Collection Exercise and AMA benchmarking initiatives; quantification issues, including modeling assumptions and scaling; and outstanding policy issues, such as the treatment of expected versus unexpected losses and home-host issues.

Audience:

The intended audience included the financial services industry, regulatory and supervisory officials, and the academic community.

Sponsors:

Roger Cole
Senior Associate Director
Federal Reserve Board

Eric Rosengren
Senior Vice President
Federal Reserve Bank of Boston

Presentations:

Session I: Regulatory Initiatives
Session II: Research on Quantifying Operational Risk
Session III: Implementation of an AMA
Session IV: Outstanding Policy Issues

Introductory Remarks, Day 1
Susan Schmidt Bies, Member of the Board of Governors, Federal Reserve System
Remarks (from Board of Governors site)

Introductory Remarks, Day 2
Cathy Minehan, President, Federal Reserve Bank of Boston
Remarks

Session I: Regulatory Initiatives

Chair: Roger Cole, Senior Associate Director, Federal Reserve System

Leaders from US regulatory agencies addressed issues pertaining to the implementation of Basel II. The session included panel discussions on AMA benchmarking initiatives, the Quantitative Impact Study and the 2004 Loss Data Collection Exercise.

Results of the AMA Benchmarking Exercise: Eric Hirschhorn, Senior Economist, Office of Thrift Supervision
Alfred Seivold, Senior Examination Specialist, Federal Deposit Insurance Corporation
Presentation
Results of the Operational Risk Loss Data Collection Exercise (LDCE) and Quantitative Impact Study (QIS): Patrick deFontnouvelle, Assistant Vice President, Federal Reserve Bank of Boston
Paper | Presentation
: Mark O'Dell, Deputy Comptroller of Operational Risk, Office of the Comptroller of the Currency
Presentation

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Session II: Research on Quantifying Operational Risk

Chair: Eric Rosengren, Senior Vice President, Federal Reserve Bank of Boston
Leading academics in mathematics and finance discussed recent innovations in operational risk quantification.

Quantitative Models for Operational Risk: Extremes, Dependence and Aggregation: Dr. Paul Embrechts, Professor of Mathematics, Swiss Federal Institute of Technology
Dr. Johanna Neslehova, Swiss Federal Institute of Technology
Dr. Valerie Chavez-Demoulin, Swiss Federal Institute of Technology
Presentation
: Discussants:
Dan Brown, Vice President and Manager of Corporate Risk Measurement, Northern Trust Corporation; Jonathan Wang, Second Vice President of Corporate Risk Measurement, Northern Trust Corporation
Presentation
The Market Value Impact of Operational Risk Events for U.S. Banks and Insurers: Dr. J. David Cummins, Harry J. Loman Professor of Insurance and Risk Management, University of Pennsylvania Wharton School of Business
Ran Wei, University of Pennsylvania Wharton School of Business; Presentation

Discussant:
Ashish Dev, Executive Vice President, Risk Management, KeyCorp
Presentation

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Session III: Implementation of an AMA

Chair: Eric Rosengren, Senior Vice President, Federal Reserve Bank of Boston
Leading experts from the financial services industry explored the issues pertinent to an AMA implementation for commercial banks.

AMA Implementation: Where We Are and Outstanding Questions (Panel 1): Joseph Chow, Executive Vice President, State Street Corporation
Presentation; Marie Gaudioso, Managing Director of Operational Risk Management, The Bank of New York
Presentation

Michael McGlinn, Senior Vice President, Corporate Operational Risk Group, Northern Trust Corporation
Presentation

Timothy Robison, Chief Risk and Compliance Officer, Mellon Financial Corporation
Presentation
AMA Implementation: Where We Are and Outstanding Questions (Panel 2): Rudi DeKoker, Co-Head of Risk Analytics, Citigroup
Jay Newberry, Head of Operational Risk, Citigroup
Presentation

Joseph Sabatini, Managing Director and Global Head of Operational Risk, JPMorgan Chase
Presentation

John Walter, Senior Vice President of Risk Capital & Portfolio Analysis, Bank of America
Presentation

David Wildermuth, Managing Director of Operational Risk, The Goldman Sachs Group, Inc.
Presentation

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Session IV: Outstanding Policy Issues

Chair: Roger Cole, Senior Associate Director, Federal Reserve System
A panel discussion of US and foreign regulators explored such topics as EL/UL, Home/Host, and AMA qualification.

Regulatory Panel - Outstanding Policy Issues: Kevin Bailey, Deputy Comptroller of Regulatory Policy, Office of the Comptroller of the Currency

Roger Cole, Senior Associate Director, Federal Reserve System

Klaas Knot, Division Director Supervisory Policy, Central Bank of the Netherlands
Presentation

Mike Macchiaroli, Associate Director of the Division of Market Regulation, U.S. Securities and Exchange Commission
Presentation

Mark Schmidt, Acting Deputy Director for Policy and Examination Support, Federal Deposit Insurance Corporation