DIPO definition for the field “Effective Gross Loss” in the record related to each single operational risk event

By effective losses we refer to negative income flows:

♦ with an amount equal to at least € 5.000 (excluding the records of updating, adjustments or deletion).

♦ Characterized by the certainty of the quantification of the amount as reported in the profit and loss account (including specific provisions and excluding generic loss provisions for which the bank is not able to trace back certain and specific events to ‘portion’ of these provisions). Hence, the reference criterion is the effective impact on the profit and loss account (including the setting up of provisions), but the record of the loss might not match the effective gross loss. For example, suppose that a robbery has taken place in a given bank: this fact caused a loss of 100 with an indemnity from the insurance company of 90, but the amount of the robbery is recorded only with regard to the amount of the excess clause, namely 10. However, the loss to be reported shall be 100.

♦ Attributable to the event, either directly or through management/departmental observations. Direct attribution applies both to the loss and to any potential expenses – invoiced by third parties – or related to the settlement of the issue.

♦ Not due to cost compensations or badly estimated operational profits. Therefore an example of a negative economic flow to be excluded would be those relating to the delayed payment of a part of the salaries erroneously computed in the previous month, given that it is a case of cost compensations, while any potential accrued interests on these amounts due to the employees shall be reported. Shall EVs simultaneously entail positive and negative economic flows, only the negative part is to be indicated (not net of profits), whereas the positive one is to be reported under the heading other income (cf. field 21 record track DIPO output flows).

♦ Not due to the introduction of retroactive regulations. The value to be registered is the necessary cost for the resolution of the loss event net of the costs sustained for ‘improvement of controls’, precautionary actions and investments in new systems, but gross of the amounts recovered by insurances, that is inter-group recovered amounts.
In case of amortizable goods, regardless of any substitution of the goods, the Effective Gross Loss is defined by its expected value on the date of the loss occurrence (this can be deduced by the insurance company’s appraisals and/or by other technical appraisals) or alternatively, lacking the above by taking replacement costs of goods having similar characteristics. The data to be indicated shall be a ‘stock’ and not a ‘flow’ measure, thus the cumulative value of the losses incurred shall be reported, even on the updating and adjustment phases of the records. The amount shall be valued in Euro without the indication of the decimals. This field will be included in the FEE and FEG quantitative data flow returns.

ABIServizi S.p.A.
DIPO - ITALIAN DATABASE OF OPERATIONAL LOSSES
Piazza del Gesù 49 - 00186 Roma - P.IVA 00988761003
www.dipo-operationalrisk.it - dipo@abi.it