Operational Risk – Scenario Analysis

This paper focuses on operational risk measurement techniques and on economic capital estimation methods. A data sample of operational losses provided by an anonymous Central European bank is analyzed using several approaches. Loss Distribution Approach and scenario analysis method are considered. Custom plausible loss events defined in a particular scenario are merged with the original data sample and their impact on capital estimates and on the financial institution is evaluated. Two main questions are assessed – What is the most appropriate statistical method to measure and model operational loss data distribution? and What is the impact of hypothetical plausible events on the financial institution? The g&h distribution was evaluated to be the most suitable one for operational risk modeling. The method based on the combination of historical loss events modeling and scenario analysis provides reasonable capital estimates and allows for the measurement of the impact of extreme events on banking operations.

iDENTM Phones Automated Stress Testing

System testing is actually done to the entire system against the Functional Requirement Specification and/or the System Requirement Specification. Moreover, it is an investigatory testing phase, where the focus is to have almost a destructive attitude and test not only the design, but also the behavior and even the believed expectations of the customer. It is also intended to test up to and beyond the bounds defined in the software/hardware requirements specifications. In Motorola®, Automated Testing is one of the testing methodologies uses by GSG-iSGT (Global Software Group - iDEN TM Subcriber Group-Test) to increase the testing volume, productivity and reduce test cycle-time in iDEN TM phones testing. Testing is able to produce more robust products before release to the market. In this paper, iHopper is proposed as a tool to perform stress test on iDEN TM phonse. We will discuss the value that automation has brought to iDEN TM Phone testing such as improving software quality in the iDEN TM phone together with some metrics. We will also look into the advantages of the proposed system and some discussion of the future work as well.

Financial Regulations in the Process of Global Financial Crisis and Macroeconomics Impact of Basel III

Basel III (or the Third Basel Accord) is a global regulatory standard on bank capital adequacy, stress testing and market liquidity risk agreed upon by the members of the Basel Committee on Banking Supervision in 2010-2011, and scheduled to be introduced from 2013 until 2018. Basel III is a comprehensive set of reform measures. These measures aim to; (1) improve the banking sector-s ability to absorb shocks arising from financial and economic stress, whatever the source, (2) improve risk management and governance, (3) strengthen banks- transparency and disclosures. Similarly the reform target; (1) bank level or micro-prudential, regulation, which will help raise the resilience of individual banking institutions to periods of stress. (2) Macro-prudential regulations, system wide risk that can build up across the banking sector as well as the pro-cyclical implication of these risks over time. These two approaches to supervision are complementary as greater resilience at the individual bank level reduces the risk system wide shocks. Macroeconomic impact of Basel III; OECD estimates that the medium-term impact of Basel III implementation on GDP growth is in the range -0,05 percent to -0,15 percent per year. On the other hand economic output is mainly affected by an increase in bank lending spreads as banks pass a rise in banking funding costs, due to higher capital requirements, to their customers. Consequently the estimated effects on GDP growth assume no active response from monetary policy. Basel III impact on economic output could be offset by a reduction (or delayed increase) in monetary policy rates by about 30 to 80 basis points. The aim of this paper is to create a framework based on the recent regulations in order to prevent financial crises. Thus the need to overcome the global financial crisis will contribute to financial crises that may occur in the future periods. In the first part of the paper, the effects of the global crisis on the banking system examine the concept of financial regulations. In the second part; especially in the financial regulations and Basel III are analyzed. The last section in this paper explored the possible consequences of the macroeconomic impacts of Basel III.