3
$\begingroup$

One of the BCBS papers on operational risk says the following:

Consistent with other operational risk losses, a bank should use a date no later than the date of reserve for including legal related losses/exposures as an input in its AMA model.

What is the date of reserve? The paper doesn't define it and I can't find anything on Google.

$\endgroup$
0
$\begingroup$

I think I've found the answer in another Basel paper. This second paper is talking about the treatment of pending losses (losses where the financial impact is not certain at this point e.g. litigation). They way to record these in the loss database is to take a "legal reserve" and record that amount, then adjust the recorded amount in the future if it changes.

So from this, I gather "reserve date" is the date the "legal reserve" (which as I understand it is allocating funds now for when this loss might be realized) is taken.

$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.