The impact of the Covid-19 pandemic on the operational risk losses of Hungarian credit institutions

Abstract

The operation of the banking sector in 2020 was determined by the outbreak of the coronavirus pandemic and, in connection with this, the maintenance of business continuity and safe operation. Due to the pandemic, losses appeared in different forms in banking operations, some of which are classified as operational risk losses. Through a quantitative and qualitative analysis of the operational risk losses of Hungarian banks linked to the pandemic, this study shows that despite the high nominal losses, the operation of the banking sector remained stable, and the capital allocated by the credit institutions for operational risks provided sufficient coverage for unexpected losses. The focus of the analysis on small and large banks showed that it was not the size of the institution and its capital calculation method, but the immediate decisions made to deal with the pandemic, as well as the infrastructural background, that determined the extent of the realized damages.