Basel II and the Quantification of IT Risks with the Loss Distribution Approach

As a consequence of the Basel II Accord banks have to quantify their operational risk. Under the most sophisticated quantification approac. A widespread method is the Loss Distribution Approach, which calculates risk measures using statistical methods and a database of historical loss events. Since IT risks are a subcategory of operational risks, the Loss Distribution Approach is, under certain conditions, applicable to IT risks.