ORX Operational Risk Report December 2009

ORX Operational Risk ReportDecember 2009

Introduction:This is the third ORX Operational Risk Report. The Report contains a high-level overview of the ORX Global Operational Risk Loss Database and the high level trends in operational risk losses observed. This edition of the report summarises losses in the period from 1 January 2001 up to 30 June 2009.

The first report was published in May 2007 when ORX had 36 members from 13 countries and the Global ORX Operational Risk Loss Database contained 63,554 loss events with a total value of approximately €21 billion.

This third Report, published in November 2009, represents losses from 52 Members headquartered in 18 countries. The Global Operational Risk Loss Database now contains 142,041 events, with a total gross loss value of approximately €47 Billion. From the end of 2008, the period covered in the last report, this represents an increase of nearly 13,000 losses with total gross loss value of approximately €4 Billion.

The report contains some charts relating to losses, on a quarterly basis, since the beginning of 2006. This material begins with Figure 11. The aim is to show the effects of the financial crisis on operational risk. It is quite possible that some operational risk events, connected with the financial crisis, will take time to resolve and will be reported to ORX in the future. An example is events involving litigation.

ORX remains a not-for-profit industry association dedicated to advancing the measurement and management of operational risk in the global financial services industry. The association continues to act as a forum for the development of common operational risk standards, leading edge research and collective learning. In addition to publishing this Report, ORX has published substantive research on operational risk measurement. ORX has decided to extend the range of information captured for Large Loss Events, this will begin to appear during 2010.

Although this Report is based on the ORX Global Operational Risk Loss Database, the association is supporting various national databases (Spain and Canada) and work is progressing on establishing a sector database for Investment Banking. In the next 12 months it is expected that data deliveries will begin to the Investment Banking database and that specialised databases for global custody, insurance, fraud, and some country oriented databases will also be established.

To learn more about ORX please visit our web site at www.orx.org.

Copyright Notice

All rights in this document are owned and controlled by ORX. ORX permits it to be used internally and transmitted publicly in whole or in part. This permission is granted provided that, if any aspect of this document is incorporated into a public document, into materials given to clients by consultants or into commercial products such as software, its ownership by ORX is acknowledged appropriately.

ORX has prepared this document with care and attention. ORX does not accept responsibility for any errors or omissions. ORX does not warrant the accuracy of the advice, statement or recommendations in this document. ORX shall not be liable for any loss, expense, damage or claim arising from this document.

The content of this document does not itself constitute a contractual agreement, and ORX accepts no obligation associated with this document except as expressly agreed in writing.

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© Operational Riskdata eXchange (ORX) 2009

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Total 2002 2003 2004 2005 2006 2007 2008 2009 H1

Total Number of Loss Events 142,041 8,519 11,338 14,920 18,106 21,620 23,117 31,511 12,910

Total Gross Loss(€ Mn) 46,761 5,726 7,448 5,314 5,152 4,711 6,404 7,584 4,383

Average Loss per Event (€) 329,208 672,145 656,906 356,166 284,547 217,900 277,026 240,678 339,504

Numbers of ORX Members 12 12 17 22 34 41 52 52

Table 1 Overall Summary of ORX Annual Data (2002 - 2009)

Table 1 provides an overall summary of the loss data reported to ORX using an annual perspective. Table 2 has similar data, but on a quarterly basis from the beginning of 2007.

As of 31 June 2009 the ORX Global Operational Risk Database contained 142,041 indiviudal loss events, where each event is equal to, or in excess of, €20,000 value. In terms of total gross loss amount the sum is €46,761 Mllion.

For the period covered the average loss amount, is €329,208 per event. This is an increase from the average amount for the period ending 31 December 2008, €320,854. For both data sets the peaks, in terms of average loss amounts, are in 2002 & 2003 and influenced by some large individual losses in the Corporate Finance business line.

As mentioned in the Introduction, there are a number of new Members contributing to ORX. However, at the same time a number of Members are completing their mergers and integration, for example Commerzbank and Dresdner Bank. As a result, the statistics for the number of Members reporting for each quarter has limited explanatory power to the trends in the data.

When considering trends in data the impact of FX rates should not be forgotten. The figures in the ORX database are all denominated in €, whereas a significant proportion of losses are denominated in US$. This affects not only US Banks, but also non-US Banks with activities in the US and conducting business in US$ outside the US. Over this period the FX rates have fluctated in excess of 10%.

Overview of ORX Data

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Figure 1: Total Number of Loss Events by Year

Figure 2: Total Gross Loss Amount by Year (€Mn)

Figure 3: Gross Loss / €100 Gross Income per Year (€)

Figure 1 shows the total number of events reported by year. The chart records the steady increase in the number of events. There are a number of biases towards the increase, for example the number of Members reporting data, especially after adjusting for mergers between ORX Members.

There is a jump in the data from 2007 to 2008. While some of this may be due to new Members, part may be due to the effects of the finanical crisis on banks and the risk environment in which they are operating. At the half-way stage, it looks as though 2009 will be between 2007 and 2008, possibly closer to the 2008 total than 2007.0

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If we exclude 2002 and 2003, with their few large losses in Corporate Finance, then the change in direction in 2007 is emphasised. Adding to the increase in loss amount in 2008 were the depressed gross income figures for some sections of the banking sector. It will be interesting to get the picture for the whole of 2009 with the recent announcements of some strong financial performances.

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Figure 2 shows the total gross loss amount reported by year. The chart records volatility in gross losses. If we exclude 2003, with its few large losses in Corporate Finance, then the trend reversal in 2007 becomes more pronounced. When you compare this chart with Figure 1, it is clearer that these increases are not just due to the increasing Membership of ORX, but that average loss sizes increased in 2007. Figure 5 shows the same information on a quarterly basis and some intra-year timing effects. We may need to wait until the end of 2010 to get a complete picture as litigation is concluded.


Visual Overview of ORX Data

Total Number of Loss Events 142,041

Total Gross Loss €46,761 Mn

Average of €1.67 per €100 GrossIncome

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Table 2: Overview of ORX data for the last 10 Quarters

Table 2 has the same structure as Table 1, but provides a quarterly, rather than annual perspective. Even with the limited length of data series, the peaks in year-end are noticeable for the number of losses and the total gross loss amounts. These are shown visually in Figures 4 and 5 below.

These 10 quarters account for almost 50% of all the events reported to ORX and 40% of the total gross loss. The gross loss percentile would be higher if we removed the large Corporate Finance events in 2002 & 2003 from the baseline.

The average loss per event is very volatile with a minimum of €143,269 and a maximum of €438,417, only 12 months apart. The overall average for this period is a loss of €267,290 per event which compares with €329,208 for the total 2002-2009 period, as reported in Table 1 and an average of €286,204 for the pre-financial crisis period of 2004-2006 inclusive.


2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Total Number of Loss Events 5,800 5,434 5,284 6,599 6,938 6,773 7,455 10,345 6,950 5,960

Total Gross Loss(€ Mn) 1,144 1,367 1,711 2,183 994 1,320 1,583 3,687 3,047 1,336

Average Loss per Event (€) 197,241 251,564 323,808 330,808 143,269 194,891 212,341 356,404 438,417 224,161

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Figure 4: Total Number Loss Events for past 10 Quarters

Figure 5: Total Gross Loss Amount for past 10 Quarters (€Mn)

Figure 6: Gross Loss / €100 Gross Income for past 10 Quarters (€)

Figure 5 shows the total gross loss amount on a quarterly basis, as reported in Table 2. These 10 quarters, when combined account for about 40% of all losses reported to ORX.

The results for 2008Q4 and 2009Q1 are significantly higher than other quarters (€3,687Mn and €3,047Mn respectively) and account for 14% of all losses reported in the 2002-2009 period. Also of interest is the steep decline over the first two quarters of 2009.

Figure 6 shows the total gross loss amount per €100 of Gross Income , as for Figure 3. Again 2008Q4 stands out with losses of €3.48 / €100 Gross Income. Contributing to this figure will be the changes in Gross Income reported to ORX. Likewise 2009Q1 and 2009Q2 may look good, but when compared with Figure 5 it is apparent that the strong Gross Income reported by Members is a contributing factor to the €1.88 and €0.78 per €100 Gross Income respectively.

Figure 4 shows the total number of loss events as on a quartetrly basis, as reported in Table 2. These 10 quarters, when combined account for about 50% of all losses reported to ORX.

The results for 2008Q4 are “head and shoulders“ above the rest at 10,345 events. Even allowing for a year-end effect, the increase in 2008Q04 vs 2008Q3 is substantial. Also of interest is the steep decline in the number of events in 2009. It is too early to say if this is a trend and we will have to wait for the full year figures to see if the 2009Q4 year-end effect offsets the reduction in 2009Q2.0

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Overview of ORX data for the last 10 Quarters

Total Number of Loss Events 67,538

Total Gross Loss €18, 371Mn

Average of €1.46 Gross Loss per €100 Gross Income

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Figure 7: Distribution of Number of Loss Events by Size

ORX data by Size of Gross Loss

Figure 8: Distribution of Total Gross Loss by Size (€Mn)

Figure 7 shows the number of loss events by size of loss. The size “buckets” have been selected by “feel” as opposed to statistical significance.

Given the possible level of granualrity in the scales, there doesn’t appear to be any significant difference in the distribution of loss sizes in 2009 in comparison to history. Possibly the loss sizes amongst the higher frequency events has increased marginally accounting for the small changes in the €20k < €100k vs. €100k < €500k “buckets”.

Figure 8 shows the total gross loss for each of the size of loss “buckets”.

On initial review, 2009 seems to be much the same as the historic data in terms of the distribution of losses. However, if an adjustment is made to the €10,000k+ loss “bucket” for the individual large losses, in 2002-2003, then a different picture emerges.

The top five events, in 2002-2008, account for a significant proportion of the total gross loss for this period. No events reported in 2009H1 are in the top five for the total period of data. Results from current litigation will be reported to ORX in the future.

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Figure 9: Distribution of Number of Loss Events by Region

Regional Perspective

Figure 10: Distribution of Gross Loss by Region

Figure 9 shows the distribution of the number of events across the regions. Members report country codes associated with each individual event, these are then mapped to regions for reporting back to the Members. This supports anonymity.The region “Other” is composed of Africa, Central and South America and the Caribbean, Eastern Europe and the Middle East. The geographic distribution of events mirrors the locations where Members are doing business, not just where their headquarters are domiciled.What is noticeable about the distribution of loss events in 2009H1, in comparison to 2002-2008, is the reduction in the proportion of events related to North America and the increase in “Others”. Due to anonymity of the data set it is not possible to tell if this is due to the locations of new ORX Members.

Figure 10 shows the distribution of the total gross loss across the regions.

There are dramatic differences between 2002-2008 and 2009H1. There is a substantial reduction in the proportion contributed by North America and equally dramatic increases in Western Europe and Others. As mentioned above, due to anonymity of the data set it is not possible to tell if this increase is due to the location of the recent additions to the Membership of ORX.

If we adjust the 2002-2008 data for the top five events, as we did for Figure 8 then the baseline for comparison changes. All of the top five events for 2002-2008 have been allocated to North America. If we remove these top five events from the data set North America for 2002-2008 provides 51% (down from 58%) and Western Europe contributes 41% (up from 36%). Even after removing these historic top five events from North America a change seems to have occurred in where events are allocated in 2009H1.


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Table 3a: Distribution of Number of Losses by Business Line by Event Type (2002-2008)

Heat Map of Event Frequency


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Internal External Employment Clients Execution, Fraud Fraud Practices & Products & Disasters Technology & Delivery & Workplace Business & Public Infrastructure Process Malicious % of Safety Practices Safety Failures Management Damage Total Total

Corporate Finance 19 184 153 292 2 10 395 0 1,055 0.82%

Trading & Sales 111 788 495 674 26 705 11,510 0 14,309 111.08%

Retail Banking 4,042 40,603 7,283 7,525 867 1,120 17,646 111 79,197 61.33%

Commercial Banking 178 3,861 331 1,818 55 237 4,291 2 10,773 8.34%

Clearing 42 611 89 112 4 151 1,684 0 2,693 2.09%

Agency Services 16 60 98 169 11 60 2,901 0 3,315 2.57%

Asset Management 55 103 141 519 9 80 2,273 0 3,180 2.46%

Retail Brokerage 223 371 688 2,378 12 63 1,577 0 5,312 4.11%

Private Banking 141 387 145 1,450 28 67 2,602 1 4,821 3.73%

Corporate Items 57 273 1,716 372 251 78 992 10 3,749 2.90%

Multiple Lines 27 157 28 110 17 44 341 3 727 0.56%

Total 4,911 47,398 11,167 15,419 1,282 2,615 46,212 127 129,131

% of Total 3.80% 12.92%36.71% 45.21%8.65% 11.94% 27.49%0.99% 2.03% 35.79% 0.10%

Table 3a shows the distribution of the number of loss events across the Business Lines and Event Types and their intersections. The shading represents the contribution to the total number of losses.

For the 2002-2008 period the top three Business Lines are Retail Banking, Trading & Sales and Commercial Banking, in that order. The top three Event Types are External Fraud; Execution, Delivery & Process Management; and Clients, Products & Business Practices. What is interesting is that the top two Event Types make such a big contribution to the total. Drilling into the table, Retail Banking is the Business Line contributing to these Event Types, in particular External Fraud.

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Table 3b: Distribution of Number of Losses by Business Line by Event Type (2009H1)

Heat Map of Event Frequency

Table 3b shows the distribution of the number of loss events across the Business Lines and Event Types and their intersections for 2009H1. The shading represents the contribution to the total number of losses.

There is consistency, with 2002-2008, over the top three Business Lines and their ranking, Retail Banking, Trading & Sales and Commercial Banking. There is little change, between the two data set, in the contribution of these Business Lines to the total.

The top three Event Types, for 2009H1, are External Fraud; Execution, Delivery & Process Management; and Clients, Products & Business Practices. Employment Practices and Workplace Safety has seen an increase from 8.65% (2002-2008) to 10.13% (2009H1). What is interesting is that the top two Event Types make such a big contribution to the total and that this applies whether considering 2002-2008 or 2009H1.


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Corporate Finance 0 15 10 23 8 0 24 0 80 0.62%

Trading & Sales 1 136 55 68 4 60 1,062 0 1,386 10.74%

Retail Banking 261 3,836 1,038 729 96 74 1,652 18 7,704 59.67%

Commercial Banking 15 401 35 251 11 11 524 0 1,248 9.67%

Clearing 1 95 2 15 0 12 116 1 242 1.87%

Agency Services 4 122 3 22 2 9 471 0 633 4.90%

Asset Management 2 2 7 49 2 10 222 0 294 2.28%

Retail Brokerage 23 32 36 194 2 4 200 0 491 3.80%

Private Banking 13 36 15 137 0 10 366 0 577 4.47%

Corporate Items 4 15 105 27 11 16 55 1 234 1.81%

Multiple Lines 1 2 2 2 0 1 7 0 21 0.16%

Total 325 4,692 1,308 1,523 136 207 4,699 20 12,910

% of Total 2.52% 12.92%36.34% 45.21%10.13% 11.80% 27.49%1.05% 1.60% 36.40% 0.15%

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Table 4a: Distribution of Gross Loss Amount by Business Line by Event Type (2002-2008)

Heat Map of Total Gross Loss


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Corporate Finance 17 171 58 6,737 0 6 518 0 7,507 17.71%

Trading & Sales 1,462 353 161 1,773 5 109 3.838 0 7,701 18.17%

Retail Banking 780 3,091 849 3,097 125 190 3,008 8 11,149 26.31%

Commercial Banking 386 1,098 56 1,736 4 42 1,821 0 5,143 12.14%

Clearing 11 49 8 116 1 22 251 0 459 1.08%

Agency Services 8 607 18 223 3 9 469 0 1,337 3.16%

Asset Management 196 18 75 594 1 8 495 0 1,387 3.27%

Retail Brokerage 161 48 152 690 1 7 195 0 1,255 2.96%

Private Banking 140 79 38 671 3 6 325 0 1,262 2.98%

Corporate Items 50 112 257 937 378 9 421 2 2,167 5.11%

Multiple Lines 42 32 38 2,679 10 47 163 0 3,013 7.11%

Total 3,253 5,659 1,711 19,254 532 454 11,505 11 42,379

% of Total 7.68% 12.92%13.35% 45.21%4.04% 45.43% 27.49%1.26% 1.07% 27.15% 0.03%

(€ Mn)

Table 4 shows the distribution of the total gross loss amount across the Business Lines and Event Types and their intersections. The shading represents the contribution to the total gross loss amount.

The top three Business Lines are Retail Banking, Trading & Sales, and Corporate Finance, in that order. If we exclude Corporate Finance for the two largest events, occurring in 2002-2003, then it drops out of the top three and is replaced by Commercial Banking .

The top three Event Types are Clients, Products & Business Practices; Execution Delivery & Process Management and External Fraud in that order. Even if we exclude the two largest Corporate Finance events, then Clients, Products & Business Practices is still the most significant event type.

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Table 4b: Distribution of Gross Loss Amount by Business Line by Event Type (2009H1)

Heat Map of Total Gross Loss

Table 4b shows the distribution of the total gross loss amount across the Business Lines and Event Types and their intersections for 2009H1. The shading represents the contribution to the total gross loss amount.

For both historical periods the top three Business Lines are Trading & Sales, Retail Banking and Corporate Finance, in that order different from the 2002-2008 period in Table 4a. A comparison between the two sets of data shows the increased contribution made by Trading & Sales (19.5% vs. 25%) and the relative reduction from Retail Banking (28.3% vs. 20.9%). For Trading & Sales the Event Type that has gained in relative importance is Execution, Delivery & Process Management. External Fraud has also increased in prominence, for Trading & Sales, climbing from 5% to 36.8%, experiencing the same level of losses 2009H1 as in the entire 2002-2008 period. Taking into account the number of losses in Table 3, the average loss per event has grown from €448,000 (2202-2008) to €2,816,000 (2009H1)!

The top three Event Types are External Fraud; Clients, Products & Business Practices; and Execution Delivery & Process Management. The most significant change is increase in the relative importance of External Fraud (14.3% for 2202-2008 vs. 36.8% for 2009H1), some of this is attributable to External Fraud in Trading & Sales, but also in Corporate Finance, Commercial Banking and Private Banking . Perhaps surprisingly, the proportion of External Fraud in Retail Banking is almost unchanged across the two periods.

Other significant changes include the increased impact of Clients Products & Business Practices upon the Clearing and Private Banking Business Lines. In terms of decreases the contribution of Execution, Delivery & Process Management is reduced for Retail Banking.


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Corporate Finance 0 506 1 5 0 0 4 0 516 11.77%

Trading & Sales 0 382 22 63 0 11 580 0 1,058 24.14%

Retail Banking 43 331 85 217 7 8 190 1 882 20.12%

Commercial Banking 43 194 7 82 0 5 135 0 466 10.64%

Clearing 1 4 0 242 0 5 13 0 266 6.06%

Agency Services 1 11 0 7 0 1 91 0 111 2.53%

Asset Management 1 0 2 54 18 1 58 0 134 3.05%

Retail Brokerage 6 4 5 27 0 0 17 0 59 1.34%

Private Banking 19 118 3 390 0 0 26 0 557 12.71%

Corporate Items 0 5 18 30 1 1 126 0 182 4.14%

Multiple Lines 27 0 0 121 0 0 3 0 152 3.46%

Total 142 1,557 142 1,237 26 32 1,245 2 4,383

% of Total 3.24% 12.92%35.51% 45.21%3.23% 28.23% 27.49%0.60% 0.73% 28.41% 0.04%

(€ Mn)

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Table 5a: Business Line Ranking 2002-2008

Business Line Performance


Business Line Average Loss per Event Business Line Gross Loss/ €100 Gross Income

€ Ranking € Ranking

Corporate Finance 7,115,261 1 Corporate Finance 6.8839 1

Trading & Sales 538,188 2 Agency Services 2.7708 2

Commercial Banking 477,379 3 Trading & Sales 2.5748 3

Asset Management 436,090 4 Private Banking 1.4419 4

Agency Services 403,455 5 Asset Management 1.2637 5

Private Banking 261,823 6 Commercial Banking 1.1455 6

Retail Brokerage 236,171 7 Retail Brokerage 1.1348 7

Clearing 170,503 8 Retail Banking 0.9258 8

Retail Banking 140,771 9 Clearing 0.8385 9

Business Line Average Loss per Event Business Line Gross Loss/ €100 Gross Income

€ Ranking € Ranking

Corporate Finance 6,447,172 1 = Private Banking 5.3213 1

Clearing 1,097,985 2 Corporate Finance 3.5988 2

Private Banking 965,716 3 Clearing 2.6002 3

Trading & Sales 763,874 4 Trading & Sales 2.0375 4

Asset Management 454,437 5 Asset Management 1.4171 5 =

Commercial Banking 373,601 6 Agency Services 1.3340 6

Agency Services 175,504 7 Commercial Banking 0.7241 7

Retail Brokerage 119,648 8 Retail Brokerage 0.6250 8

Retail Banking 114,579 9 = Retail Banking 0.5723 9

Table 5 shows two risk rankings for the Business Lines. This excludes the Corporate Centre and Multiple Lines of Business, which don’t have a Gross Income of their own.

For the Average Loss per Event an interesting observation is the increase (2002-2008 vs. 2009H1) in the average size of the losses for half of the Business Lines. The exceptions are Corporate Finance, Commercial Banking, Agency Services, Retail Brokerage, and Retail Banking. The increase in Clearing is 545%, Private Banking is 270%, and Trading & Sales is 41%.

For the 2002-2008 ranking, we know from previous discussion, the position of Corporate Finance would be greatly altered if we adjusted for the two largest losses reported to ORX. This makes the position of Corporate Finance at the top of the 2009H1 Average Loss per Event the more interesting.

For the Average Gross Loss per €100 Gross Income there are big differences in the ranking. As mentioned earlier a contributing factor will be the change in Gross Income streams experienced by individual business lines over 2009. If we look at the fifth ranked Business Line, Asset Management, then the Gross Loss per €100 Gross Income has gone from €1.26 to €1.41. It is only when we get to the sixth rank that the figures are lower.

Table 5b: Business Line Ranking 2009H1

Figure 11a: Gross Loss (€Mn)

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Figure 11a: All Business Lines Stack Chart of Gross Income, Gross Loss & Number of Losses

Performance in the Financial Crisis

The next few figures indicate how the finanical crisis has affected the operational risk environment for Members of ORX. Quarterly data for 2006 has been added for reference, using the assumption that the crisis began to make itself felt in 2007.

Figure 11a shows a stack chart across “All” Business Lines and Event Types on a quarterly basis. The stack component shows Gross Income, Gross Losses and the Number of Losses from the beginning of 2006. The purpose of showing the data this way is to avoid issues created by ratios, especially when it is not always clear whether the denominator or numerator is changing and in which direction.

In terms of Gross Income the dip at the end of 2008 and the recovery in 2009 becomes evident.

The dramatic increases in the total gross loss amount and number of events reported also becomes obvious. However, the improvement in 2009 operational risk management performance make take another 18 months, or longer, to


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Figure 11b: Corporate Finance Stack Chart of Gross Income, Gross Loss & Number of Losses


Figure 11b shows a stack chart for Corporate Finance showing the more granular Level 2 Business Lines of Corporate Finance, Municipal / Government Finance and Advisory Services.

The impact of the financial crisis on the Gross Income of Corporate Finance (Level 2) in 2008 becomes quite evident as does its recovery in 2009. Advisory Services experienced a similar reduction and has recovered to 2006 levels.

This chart also demonstrates the high level of volatility in Gross Losses reported for Corporate Finance (Level 2), the spikes representing €348 Million and €508 Million. In comparison the other Level 2 Business Lines look stable, but the volatility is reduced by the scale of the chart necessitated by Corporate Finance.

In comparison to the following charts, the number of losses for the Corporate Finance (Level 1) Business Line is low. When we compare the Number of Losses with the Gross Loss it can be seen that the loss spikes are due to a very small number of events.


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Figure 11 b: Gross Income (€Mn)

Figure 11b: Gross Loss (€Mn)

Figure 11b: Number of Losses

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Figure 11c: Trading & Sales Stack Chart of Gross Income, Gross Loss & Number of Losses


Figure 11c shows a stack chart for Trading & Sales showing the granular Level 2 Business Lines of Equities, Global Markets, Corporate Investment and Treasury.

The impact of the financial crisis on the Gross Income of Global Markets in 2008Q4 becomes quite evident as does its recovery in 2009. In comparison the other Level 2 business lines seem to evolve more gradually, but some of the volatility may be reduced due to the required scale.

This chart also demonstrates the high level of volatility in Gross Losses reported for Global Markets, and to a lesser extent Equities. Treasury also has a spike in 2008Q4 although only up to €100 Million it represents a +325% increase on 2008Q3. Due to the scale, Corporate Investments is practically on the x-axis. It may take 18 months or more for the results of any current litigation to feed through into the reports to ORX.

In terms of the Number of Losses, the numbers in 2009Q2 have dropped to 2006Q1 levels. When we compare the Number of Losses with the Gross Loss it can be seen that the Global Markets €587 Million total gross loss amount is probably due to a few large individual events. However, for 2008Q4 there is also an increase in the number of events, although for an loss spike of this size there are probably a few individual large loss events as well.


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Figure 11 c: Gross Income (€Mn)

Figure 11c: Gross Loss (€Mn)

Figure 11c: Number of Losses

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Figure 11d: Commercial Banking Stack Chart of Gross Income, Gross Loss & Number of Losses


Figure 11d shows a stack chart for Commercial Banking, there are no Level 2 Business Lines.

In comparison with Corporate Finance and Trading & Sales there seems to be very little adverse effect on Gross Income of the financial crisis. The trend is positive.

As with the other Level 1 Business Lines there is volatility in the Gross Loss amounts. The spikes appear in 2007Q4 and 2008Q4. There is insufficient information to say whether this is a “year-end” effect or coincidence.

In terms of the Number of Losses, the trend appears to be upwards, results for the rest of 2009 may confirm. The spikes in Gross Loss amounts correspond to increases in the number of losses. Nevertheless the average gross loss per event is approximately 200% higher than the Q3 figures indicating a few individual large losses.

In the next edition there will be a closer look at the performance of the non-wholsale banking activities from the beginning of 2006.


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Figure 11d: Gross Income (€Mn)

Figure 11d: Gross Loss (€Mn)

Figure 11d: Number of Losses

Documents

ORX Operational Risk Report December 2009