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Operational risk is currently receiving significant media attention, as financial scandals have appeared regularly and multiple events have exceeded one billion dollars in impact. Regulators have also been devoting attention to this risk and are finalizing proposals that would require banks to hold capital for potential operational losses. This paper uses newly available loss data to model operational risk at internationally active banks. Our results suggest that the amount of capital held for operational risk will often exceed capital held for market risk and that the largest banks could choose to allocate several billion dollars in capital to operational risk.

Operational risk is currently receiving significant media attention, as financial scandals have appeared regularly and multiple events have exceeded one billion dollars in total impact. Regulators have also been devoting attention to this risk, and are finalizing proposals that would require banks to hold capital for potential operational losses. This paper uses newly available loss data to model operational risk at internationally active banks. Our results suggest that the amount of capital held for operational risk will often exceed capital held for market risk, and that the largest banks could choose to allocate several billion dollars in capital to operational risk. In addition to capital allocation decisions, our findings should have a direct impact on the compensation and investment models used by large firms, as well as on the optimal allocation of risk management resources.

Two studies examined the existence, within an achievement-related context, of a social norm favoring internal explanations for task performances. In the first study, we investigated the reactions of observers to an actor's high, moderate, or low self-attribution of causal responsibility for his negative performance outcome on an ostensibly standardized aptitude test. The results indicated that the actor was evaluated more positively to the degree that he accepted more personal responsibility for his performance. In the second study, we examined the reactions of depressed and nondepressed observers to an actor's high or low self-attributions of causal responsibility for his poor performance on a test of analytical ability. On the basis of the notion that the chronic lack of control and resultant uncertainty, presumably characteristic of depressed persons, motivates attributional information processing, we expected depressed observers to be more sensitive to the actor's violation of the norm of internality and to respond with more social disapproval than nondepressed observers. Results generally were consistent with this reasoning. Experimental findings are discussed in terms of the interpersonal implications of expressed attributions.

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