Paper Topic:

Operational Risk - Summary of dissertation

Study , the author clarifies that the main limitations of the study pertain to

Historical data

Confidentiality of data

Size of the banks in UAE (most of the banks in UAE are middle or small sizes

Time

Cost

The author maintains that these limitations are common to studies relying on case research for the collection of primary data . However the author assures that these limitations will not impede the accomplishment of stated research goals

In chapter three , the researcher discuses the literature review by attempting to answer the

question how banks can quantify operational risks based on scarce historical loss data and whether it is possible to use Loss Distribution Approach as standard approach based on the Basel two and in determining capital for operational risks . The researchers established that the Basel Committee was put in place in late 1974 by the central bank governors of the G-10 member countries in response to instability in international currencies and global banking markets (The Banking Association-SA 2005 . Some of the member countries include the United Kingdom , United States , France , Canada , German , Japan , the Netherlands , Spain , Switzerland and Sweden

Late in 1980s , the Basel committee came out with the first framework of banking supervision called the Basel one . The Basel one framework emphasized on capital risk and capital adequacy guidelines . Under the Basel one , recommendations were made on setting aside eight percent of the capital spend on loans using the matrix system (Lnaka Rating Agency Ltd 2006 . Practically , this requires banks to set aside eight million if they sanction loans amounting to hundred million

However , the author points out that this has come under heavy criticism due it its bias towards financial systems employed by the G-10 member countries . In addition , the guidelines were criticized for being narrow and their failure to enhance financial...

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