The recent experience of the credit derivatives market shows that ambiguities can arise even in standardised documentation, and the sponsors and users of the documentation need to be alert to this and make changes where necessary. The link with operational risk But the bottom line is that standardisation will reduce the risk that something goes wrong with the documentation. This feeds in turn into reduced legal risk, which is included within the definition of operational risk adopted by the Basel Committee. This defines operational risk as “the risk of loss resulting from inadequate or failed internal processes, people or systems or from external events”. This definition focuses on the causes of operational risk - internal processes, people, systems or external events. Operational risk losses can be further classified into various “event types” and assigned to each of a bank’s major business lines. By classifying losses in this way, banks are better placed to identify appropriate risk controls and to assess the impact of these. In its draft paper on Sound Practices for the Management and Supervision of Operational Risk, the Basel Committee has identified seven main loss event types for operational risk. These include losses related to “execution, delivery and process management” within which resides documentation risk. Why has the Basel Committee decided to focus on operational risk? The answer lies in the growing diversity and complexity of banking operations arising from well-known phenomena such as globalisation, the growing sophistication of financial technology and outsourcing.
Dear participants, At the conclusion of my address today, I would like to draw your attention on a consolidated annual publication of the Bank of Albania – our Calendar 2012, the jubilee year of the 100th anniversary of Albania’s Declaration of Independence. Calendar 2012 features a cycle of contemporary works of art, which elegantly combine traditional and modern elements. This artistic ingenuity provides a varicoloured and loyal depiction of the long and toilsome journey of the Bank of Albania and the Lek through good and bad days, times of war and peace, subtle and radical changes. These fellow travellers have always succeeded in renewing and strengthening their shared foundation, which is your trust and confidence. This thread sews together in this calendar, art and the Bank of Albania, as two components that create, uphold and promote values. The Calendar is an artful portraying of our central banks traits such as stability, independence, confidence, transparency and financial literacy, which nourish our dream of a common European future. This future rests in our hands like a golden globe of prosperity and happiness.