Modeling the operational risk in Iranian commercial banks: case study of a private bank

Abstract

The Basel Committee on Banking Supervision from the Bank for International Settlement classifies banking risks into<br /> three main categories including credit risk, market risk, and operational risk. The focus of this study is on the<br /> operational risk measurement in Iranian banks. Therefore, issues arising when trying to implement operational risk<br /> models in Iran are discussed, and then, some solutions are recommended. Moreover, all steps of operational risk<br /> measurement based on Loss Distribution Approach with Iran's specific modifications are presented. We employed<br /> the approach of this study to model the operational risk of an Iranian private bank. The results are quite reasonable,<br /> comparing the scale of bank and other risk categories.