Methods of Operational Risk Economic Capital Estimation and Allocation in Russian Commercial Banks

摘要

Modern systems of risk management in financial institutions require a process of estimation of the amount of capital that is needed to cover losses arising from various types of risk and its allocation to business units in order to measure their risk-adjusted performance. In this paper we describe the structure of operational risk economic capital estimation model suitable for implementation of sophisticated methods of capital allocation to business units. We compare different methods of allocation and discuss their applicability for Russian banks and describe their practical implementation for a large Russian bank.