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Global banks report lowest operational risk losses in a decade

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The latest data in our Banking Operational Risk Loss Data Report 2024 reveals that global banks have experienced the lowest operational risk losses in a decade.


Members can read the full report for free. If you're not a member, you can download a free summary for an overview of the results or purchase the main report for the full insights and analysis.


Losses decrease by 32%

Despite 2023 being a year of geopolitical and economic turbulence and ongoing industry change, 82 global bank members have seen a 32% decrease in financial losses in the last 12 months.

The decrease is largely driven by very low levels of conduct related losses (improper business or market practices). ORX members reported a drop of almost two-thirds (63%) with figures at €3.2bn in this category compared to the previous five-year average of €8.5bn (or compared to the post financial crisis years when annual losses often topped €20bn and beyond).

 

“ORX member discussions have indicated that the large conduct related losses from previous years have forced product managers to look very hard at potential conduct implications for future and current offerings. Whilst there may still be potential losses on the horizon, the member sense is that banks are less likely to see large conduct related losses in future. Time will tell.”

Steve Bishop, ORX Research & Information Director

 

Conversely, transaction related losses (such as those related to failed transaction processing or accounting errors) reached almost €8bn in 2023 making transaction related risk the costliest type of operational risk. 

Annual loss frequency also decreased in 2023 (65,411) with 13,896 fewer loss events submitted than in the previous year (79,307). The average size of an operational risk loss event in 2023 was €231,651. The largest annual average in the past six years was €360,718 in 2020.

Low severity fraud remains a threat

Though total industry gross loss is decreasing, the report identifies a continuation of high numbers of low impact external fraud events. Banking members reported 36,811 fraud events in 2023, with low severity fraud events in the past two years at the highest frequency in the 22-year history of the ORX database. In 2022, 38% of firms experienced their highest ever number of external fraud events, with total frequency increasing by 66% on the previous year.

Since banks only report fraud events exceeding €20,000, this suggests a more substantial threat to banks from low severity fraud. 

 

“External fraud is a huge concern for financial institutions across the globe which have seen increases in the volume of fraud events over recent years. ORX members attribute this increase in fraud to a range of factors such as social media use, organised crime, use of banking apps, authorised push payment fraud and requirements in some jurisdictions around reimbursing victims.”

Steve Bishop, ORX Research & Information Director

 

Across the regions

Brazil has the highest number of losses per firm with 4,045 followed by United States with 2,315 and France with 914. Most of Brazil’s high frequency is driven by employee relations losses. Typically, African and Asian countries experience fewer losses per firm than Western Europe and the Americas.

External fraud is the most frequent event type for 20 countries including the United States, United Kingdom, South Africa, and much of Eastern Europe. Clients, products & business practices is the most frequent event type for seven European countries and employment practices & workplace safety is top for Brazil, Argentina and Chile.

 

“External fraud is a huge concern for financial institutions across the globe which have seen increases in the volume of fraud events over recent years. ORX members attribute this increase in fraud to a range of factors such as social media use, organised crime, use of banking apps, authorised push payment fraud and requirements in some jurisdictions around reimbursing victims.”

Steve Bishop, ORX Research & Information Director