But Basel II, by designing a risk-based system for credit and operational risk, separates the two risks and would require capital to be held for each separately. Operational disruptions have caused banks to suffer huge losses and, in some cases, failure here and abroad. At times they have dominated the business news and even the front pages.
Appendix 1 to this statement lists the ten largest such events of recent years. In an increasingly technology-driven banking system, operational risks have become an even larger share of total risk; at some banks they are the dominant risk. To avoid addressing them would be imprudent and would leave a considerable gap in our regulatory system.