BNM Publishes Guidance on Reporting of Operational Risk Data
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.
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Effective Date: March 01, 2021
Keywords: Asia Pacific, Malaysia, Banking, Insurance, Operational Risk, ORION, Reporting, Islamic Banking, FAQ, BNM
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