modelos avan%e7ados para risco operacional - christian mittelberg
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RiskDeutsche Bank
Advanced Models for OR
Christian Mittelberg
Head Operational Risk Management, Americas23.10.2012
,
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Agenda
1. Risk Management at Deutsche Bank
. vance easurement pproac
3. 2nd Generation Capital Modeling
Christian Mittelberg23.10.2012Risk
Deutsche Bank
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Deutsche Bank in NumbersPresent in over 72 countries with 3,064 branches worldwide
Christian Mittelberg23.10.2012Risk
Deutsche Bank
Deutsche Bank Group June 30, 2012*
Headcount 100,654
Assets 2,241bn
RWA 373bn
Net Revenues (1H2012) 17.2bn
Net Income (1H2012) 2.1bn
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*Deutsche Bank Interim Report as of June 30, 2012
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Deutsche Bank in BrazilA leading local banking franchise with over 100 years of history
DB Brazil
CorporateFinance
Global MarketsEquities
TransactionBanking
Brokerage services offered tolocal qualified investors and
foreign investors
Derivatives and Structuredtrades related to Equityproducts / underlying
Research coverage
Foreign Trade Services,including Import and Export
related financing andservices
Domestic Custody and Trustservices
Cash Management offered to
Capital Markets Coverage
Debt Capital Markets
including issuance of debtand offering of shares)
Mergers & Acquisitions
Advisory services (i.e. expertopinions , company
FX, Fixed Income andCommodities
Derivatives includingFutures, Options Swaps etc.
Structured Products,including Credit Derivatives,Notes linked to assets)
Global MarketsDebt
Christian Mittelberg23.10.2012Risk
Deutsche Bank 3
Pillars
Global coverage of clients and globally integrated business and product suites
Comprehensive business and product platform with outstanding level of capacity and expertise
Mature operation in Brazil, focus on expansion, growth and leverage of synergies of the Corporate Investment Bank (CIB)
Institutionsevaluation etc.)
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Risk- PeopleA global Organization
1,502
North
America9.3%
271
30
182UK
12.7%
369
Cont.Europe18.6%
543
GER
51.5%
Japan1.0%
Asia6.2%
Christian Mittelberg23.10.2012Risk
Deutsche Bank
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SouthAmerica
0.1%
14
Pacific0.5%
2,9142,914 eemployeesmployees (FTE)(FTE) worldwideworldwideFTE, June 2012
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RiskManagement Team
Chief Risk Officer
Stuart Lewis
Frank Kuhnke
Global HeadMarket Risk
Management
David Stevens Peter Yearley Stephan Wilken
Chief Credit OfficerPBC
Chief Credit OfficerAWM
Deputy CRO,Enterprise RiskManagement,Risk Strategy
Christian Sewing Konrad Joy
RiskChief Operating
Officer
Chief Credit OfficerCB&S, GTB
Divisional Chief Credit Officers
Christian Mittelberg23.10.2012Risk
Deutsche Bank
Vincent Choo
Regional CROAPAC
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Global HeadOperational Risk
Management(Interim)
Michael Berkowitz Richard Ferguson
Regional CROAmericas
Regional Chief Risk Officers
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Agenda
1. Risk Management at Deutsche Bank
. vance easurement pproac
3. 2nd Generation Capital Modeling
Christian Mittelberg23.10.2012Risk
Deutsche Bank
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AMA model development at Deutsche Bank
2000 Economic capital with LDA (top-down model)
1999 Systematic collection of loss data
2007 Regulatory approval
2006 Implementation production engine / AMA application submitted
2005 Official EC calculation with AMA model
2003 Implementation of prototype
2001 Kick-off AMA project
Christian Mittelberg23.10.2012Risk
Deutsche Bank
Ongoing model improvement & extensions
Since 2008 Annual Audits from BaFin
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AMA Core Model Allocation(via model)
Group Level
Capital*(before EL & QA)
A re ate Loss Distribution Correlation /
Group-Level
Deutsche Banks AMA model overviewLoss distribution approach (LDA) based on historical loss data
Business Divisions
Gross Cell Losses
Net Cell Losses
Severity
Diversification
X
Business Divisions
EventTypes
BL&ET-Level
KRI
RCSAEL
-
Frequency
Capital*(before EL & QA)
QA
Capital* after EL & QA
Divisional Level
-
InsuranceModule
Christian Mittelberg23.10.2012Risk
Deutsche Bank
Insurance ParametersInsurance Parameters
Capital* after EL & QA
Allocation
Relevant Loss Data
Internal
Loss Data
dbIRS
External
Loss Data
ORXScenarios
InternalScenarios
Public
Loss Data
OpVar
* Capital = Economic Capital (EC) and Regulatory Capital (RC)
Allocation
Product /Country Level
Country
Product
Input Data
InsuranceContracts
Insurance
Data Adjustments
& Allocation
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AMA Core ModelCapital*(before EL & QA)
Aggregate Loss Distribution Correlation /
Group-Level
Insurance modeling
Gross Cell Losses
Net Cell Losses
Severity
vers ca on
X
Business Divisions
EventTypes
BL&ET-Level
Frequency
InsuranceModule
Christian Mittelberg23.10.2012Risk
Deutsche Bank
Insurance ParametersInsurance ParametersRelevant Loss Data
Internal
Loss Data
dbIRS
ExternalLoss Data
ORXScenarios
Internal
ScenariosPublic
Loss Data
OpVar
Input Data
InsuranceContracts
InsuranceData
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Reflection of InsuranceDBs state-of-the-art insurance model approved for RC calculation
Net Losses
Net losses
Insurance modelling
Mapping of event types to insurance policies
Gross LossesMapping Policies
Insurance
Simulatedgross losses
Christian Mittelberg23.10.2012Risk
Deutsche Bank
Limits & deductible
Rating of insurer & haircuts
Insurance payment is calculated for each of
the simulated gross losses separately
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Insurance mappingConnecting the insurance and OR worlds
Fidelity
OR event types Insurance policies
Infrastructure
Exec., Delivery & Proc. Mgmt
Clients, Products & Bus. Pract.
Property Damage
General Liability
Professional Indemnity
Serv. & Elec. Break-D.
Burglary, Theft, Rob.
80%
10%10%
Christian Mittelberg23.10.2012Risk
Deutsche Bank 11
Employers Pract. Liab.
Not insured
Employ. Pract. & Workpl. Safety
random mapping
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Forward-looking capital adjustments
AMA Core Model
Allocation(via model)
Group Level
Capital*(before EL & QA)
Aggregate Loss Distribution Correlation /
Group-Level
Business Divisions
Gross Cell Losses
Net Cell Losses
Severity
X
Business Divisions
EventTypes
BL&ET-Level
KRI
RCSAEL
Capital Sub-
Frequency
Capital*(before EL & QA)
QA
Capital* after EL & QA
Divisional Level
QA Sub-
Insurance
Module
Christian Mittelberg23.10.2012Risk
Deutsche Bank 12
Insurance ParametersInsurance Parameters
Capital* after EL & QA
Allocation
Relevant Loss Data
Internal
Loss Data
dbIRS
ExternalLoss Data
ORXScenarios
InternalScenarios
PublicLoss Data
OpVar
* Capital = Economic Capital (EC) and Regulatory Capital (RC)
Allocation
Product /Country Level
Country
Product
Input Data
InsuranceContracts
InsuranceData Adjustments
& Allocation
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Qualitative adjustment in DBs OR model
Qualitative adjustment (QA) applied to contributory capital of business lines
QA is separated from the quantitative capital calculation
Transparent way of how risk management can influence capital
Main facts on QA
Risk indicators and self assessment are main components
QA score (applied on BL/ET level) plus penalty component (inappropriate loss datacollection, KRI/SAT minimum standards, etc.)
Measurement of risk sensitivity and coverage determines effective range
Key risk indicators
Christian Mittelberg23.10.2012Risk
Deutsche Bank
, , , , - , ,
Business specific KRIs, e.g. nostro reconciliations, outstanding confirmations,average processing time of customer complaints
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Qualitative adjustment in a nutshell
Imperfection of risk
measurement instruments(KRI, SAT)
From QA scorecard
(score as output frominstruments)
Inappropriate data
collection, KRI/SATminimum standards,
+60%
e.g.
%Coverage
Risk Sensitivity
Effective Ran e
Score
%
QA Percentage(13%)
maps out Penalty
Component
Final QA( 13%)
36%
+36%
1
2
3
4
5
Christian Mittelberg23.10.2012Risk
Deutsche Bank
Qualitative adjustment (QA) calculated ondivisional level and aggregated to Group level(Group shown above)
Final QA percentage applied to capital afterdeduction of expected loss
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Maximum Range
of Adjustment
60%
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Embedded Continous Validation & Improvement
Framework & Model Risk Management
Risk Profile ReviewsAMA Production
Weekly Themes
Deep Dive Identification
Deep Dive Schedule
Top Risk Analysis
Idea Log
Project Identification
Program Governance
Validation
Christian Mittelberg23.10.2012Risk
Deutsche Bank 15
DB ORM Plan
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Agenda
1. Risk Management at Deutsche Bank
. vance easurement pproac
3. 2nd Generation Capital Modeling
Christian Mittelberg23.10.2012Risk
Deutsche Bank
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Exposure-based modeling beyond LDAResearch on structural models for OR modeling
Drawbacks of current LDA model based on historiclosses and stochastic severities
No immediate capital impact of management action likede-risking
Current
Impact of new losses (especially external) difficult to
rationalize, e.g. OR exposure does not change overnight
Exposure-based thinking more natural than thinking interms of loss distributions (based on historical data)
Use of exposure-based models to substitute /supplement LDA approach
Number and size of losses closely related to currentportfolio
DBs
CurrentPortfolio
=Exposure
LossPotential
(size &freq.)
OR
Capital
Christian Mittelberg23.10.2012Risk
Deutsche Bank
Support of OR management
Discussion centered around actual exposure (portfolioand market environment)
Eases discussions with business
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MaximumLoss
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Exposure-based modeling of litigation-related ORChallenges
Proof of assumptions
Litigation trigger event can be modeled as credit event (default or rating downgrade)
Exposure can be derived from face volume of own share of issues
Data & calibration
Internal issuance and litigation history
Current portfolio of issuances with corresponding credit ratings / PDs
Calibration of required model parameters (credit risk parameters, exposures, stochastic LGDs)
No need to develop new modeling techniques since standard methodology used for credit risk ECcan be utilized (factor model, rating migration, )
Integration in standard LDA model used for other OR categories
Christian Mittelberg23.10.2012Risk
Deutsche Bank
Combination with remaining cells of standard LDA model
Correlation/diversification between exposure-based model and LDA model
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Exposure-based OR modeling of litigation related ORLeveraging credit risk approach
Christian Mittelberg23.10.2012Risk
Deutsche Bank 19
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Integration of EBOR model into LDA core modelDependence structure modeled via common copula for frequencies
AMA Core Model Capital*(before EL & QA)
Group-Level
Exposure-based model similar
to cell of BL/ET matrix
Gross Cell Losses
Net Cell Losses
ggrega e oss s r u on
Business Divisions
EventTypes
BL&ET-Level
SeverityFrequency
Frequency
Issuance 1K
Litigation 1L
Current Portfolio
MonteCarlo
Exposure-Based Model
Christian Mittelberg23.10.2012Risk
Deutsche Bank 20
Aggregate Loss LGD class 2LGD class 1 LGD class
=
=
N
i
L
1
iiagg )LossRatio()Exposure(
Link viacopula
LossMitigants
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Q & A Session
Christian Mittelberg23.10.2012Risk
Deutsche Bank
AMAAMAAMAAMA
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