
174 Operational Risk Control
have been accepted. I had a professor of banking at UCLA who taught his students
that a loans officer who rejects too many loan requests is as bad as one who is really
poor in screening the loans.
In banking, operating characteristics curves have been employed with the risk
adjusted returns on capital (RAROC) model, of the late 1980s, as well as with expert
systems developed and used by the financial industry at around the same timeframe.
Let’s recall that the 1996 Market Risk Amendment by the Basel Committee stipulated
that the level of confidence should be equal to 99%. As can be seen in Figure 8.5:
䊏 An ␣ = 0.10 (which ...