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In 2003 the BASEL Committee on Banking Supervision
(the Committee) outlined the framework of 10 sound practice principles
for managing operational risk. Among these principles, the Committee
emphasized the need for:
- Board oversight.
- Regular monitoring.
- Policies and practices to control and mitigate
operational risk.
- Periodic review of risks and controls.
- Adjustment of risk management strategies, as
needed.
- Public disclosure of operational risk to the
market.
As the Committee continues to make the final
modifications to its proposal for a new capital adequacy framework
that will include management of operational risk, many domestic
and international banks are taking proactive steps to meet specific
requirements of the proposed capital adequacy framework. While final
implementation of the BASEL II framework is scheduled to take effect
in member countries by year-end 2006, management of operational
risk should begin now.
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