BNM published a policy document that provides comprehensive guidance on reporting governance, reporting procedures, mandatory data items, and reporting taxonomies of operational risk submission with regard to loss events, key risk indicators, and scenario analysis. To help users ensure quality submission, BNM also published a set of frequently asked questions (FAQs) and a user guide that contains the technical specifications for application accessibility and system functionality navigation. The policy document is applicable to certain financial institutions that include licensed banks, investment banks, Islamic banks, and international Islamic banks, with an effective date of March 01, 2021.
The guidance stipulates that the reporting entities must prepare and submit information on loss event data, key risk indicators, and scenario analysis to BNM through the Operational Risk Integrated Online Network (ORION). The guidance sets out the reportable operational risk events and explains their classification and the reporting timelines. The reportable events include robbery and theft, cyber threat, reputational impact events, operational risk events equal to or more than MYR 1 million, customer information breaches, actual and potential Shariah Non-Compliance events, credit and debit card frauds, overseas loss events, physical cash shortages, and actual loss equaling or exceeding MYR 1,000. The reporting data must include the operational risk events of foreign and offshore subsidiaries or branches of the reporting entities that resulted in financial-related losses. The recent revisions to the policy and the FAQs are intended to:
- Provide clarity on the reporting of Shariah non-compliance events
- Realign cyber-risk-related definitions and terminologies with the FSB cyber lexicon
- Enhance the granularity of reporting requirements to improve the accuracy of operational risk reporting
The guidance specifies that the reporting entities must put in place appropriate internal governance and processes to ensure completeness, accuracy, and timeliness of the data and information submission to BNM, including processes for consolidation, validation, and reconciliation of such data and information with the internal database, system, and financial accounts of the reporting entities. Financial institutions must submit information on the key risk indicators according to the applicability, description, and frequency set out in the key risk indicators taxonomy (refer to Appendix 15). Additionally, financial institutions must conduct scenario analysis as and when BNM requires and submit the results of the scenario analysis and other information to BNM, through ORION, within the prescribed time. Scenario analysis is a forward-looking tool that examines and explores predominantly emerging risks and rare tail-end events, which are usually low-frequency, high-impact events. This policy document supersedes the policy document on "Operational Risk Reporting Requirement – ORION" that was issued on June 22, 2018.
Effective Date: March 01, 2021
Keywords: Asia Pacific, Malaysia, Banking, Insurance, Operational Risk, ORION, Reporting, Islamic Banking, FAQ, BNM
Previous ArticleBaFin to Keep Countercyclical Capital Buffer at 0% Until End of 2021
In a recent Market Notice, the Bank of England (BoE) confirmed that green gilts will have equivalent eligibility to existing gilts in its market operations.
The Financial Conduct Authority (FCA) published the policy statement PS21/9 on implementation of the Investment Firms Prudential Regime.
The European Banking Authority (EBA) proposed regulatory technical standards that set out criteria for identifying shadow banking entities for the purpose of reporting large exposures.
The Board of the International Organization of Securities Commissions (IOSCO) proposed a set of recommendations on the environmental, social, and governance (ESG) ratings and data providers.
The European Commission (EC) announced plans to defer the application of 13 regulatory technical standards under the Sustainable Finance Disclosure Regulation (2019/2088) by six months, from January 01, 2022 to July 01, 2022.
The European Insurance and Occupational Pensions Authority (EIOPA) proposed to amend the supervisory statement on supervision of run-off undertakings that are subject to Solvency II regulation.
The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.
Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.
The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.