New banking approach revolutionizes operational risk measurement for financial stability.
The article compares different ways banks measure operational risk, which is the risk of losses from everyday operations. The researchers looked at two methods: the basic indicator approach and the standardised approach. They also considered a variant called the alternative standardised approach. The study found that these methods have different ways of calculating how much capital banks need to cover operational risks. This research helps banks understand and manage their risks better, especially after the financial crisis.