Operational risk is currently a major risk category for U.S. bank holding companies, and it has grown both in dollar terms and relative to other risks in recent years. As of December 2017, operational risk accounted for 28 percent of total regulatory capital, on average, at the group of institutions that are subject to the Advanced Capital Adequacy Frameworkin determining their capital requirements. (Each firm in this group currently has $250 billion or more in consolidated total assets or $10 billion or more in consolidated total on-balance sheet foreign exposure.) This figure represents a significant amount of capital in comparison to the capital held against market and credit risk (6 percent and 66 percent of total regulatory capital, respectively). Furthermore, in the most recent Dodd-Frank Act Stress Test, the severely adverse scenario projected operational risk losses for the thirty-five participating BHCs of $135 billion, or 23 percent of the $578 billion in aggregate losses projected for these firms over the nine quarters ending in March of 2020.
The full article can be found at https://libertystreeteconomics.newyorkfed.org/2019/01/coming-to-terms-with-operational-risk.html