An Empirical Study Of Key Factors Influencing Domestic Commercial Bank Risk Management Capability

Federal Reserve Chairman Alan Greenspan (Alan Greenspan) spoked in the "American Banker" magazine Century edition (published in December 1999) of the opening article, "Risk, Regulation and Future" that: "Clearly, the banks have made so many contributions to our society , mainly because they are willing to take risks. "Wriston, former president of CITI bank (Wriston) once said, "The meaning of life lies in risk management; in fact bankers are engaged in risk management industry."Fed Vice Chairman Roger Ferguson Rich, In the March 4, 2002 speech (titled "Back to the management of bank risks the future"), also pointed out: "Banks take risks because of survive and prosper, while the risk is the most important economic function of banks, and risk is the reason for the existence banks."IT's visible that commitment and management of risk is inherent in the basic functions of commercial banks. Because of risk-taking, banks have earnings power and ability, because the level of risk management capabilities, banks will survive of the fittest.Banking industry is special for its risk operation. Bank is also a product of risk management; risk management is the eternal theme of their operation and development.The end of 2007 subprime mortgage crisis erupted and then triggered a global financial crisis which has brought the international financial industry a heavy blow. With the interleaving impact of the credit risk, market risk, operational risk, a large number of financial Institutions were in heavy losses, market value has shrunk substantially, or access to government funding, or even went bankruptcy. Risk-management capabilities have been the decisive factor in the life and death of a commericial bank. Countries around the world have put great emphasis on the bank risk management capability than ever before. Gone bankrupt or Government's taking over banks continued to reflect on their mistakes or learned the positive lessons from the crisis. What's the content of Commercial bank risk management capcaity? What's the key factors affecting the capcaity? What's the mechanism action of the key factors?Systematically sorting out these issues and to find the answer is obviously of great significance. Solving these problems will surely contribute to China's banking industry practitioners and regulators to develop the right business strategies and regulatory strategy, and enhancing our bank's risk management capabilities, thus enhancing our banks in the domestic and international market competitiveness.Based on the above research background and related theories of reflection, this paper mainly discusses the meaning of commercial banks risk management capabilities, identification of key influencing factors of commercial bank risk management capcaity and their mechanism action. Proposing the conceptual model of domestic commercial bank risk management capability, And through empirical research methods, the conceptual model was to be verified. According to the purpose of this research, the paper content is divided into seven chapters, each chapter of the main elements are as follows:Chapter I is the Introduction. From the three research questions presented in the context of practice to clarify the purpose and significance of research, clear object of study and research methods, the final part of this chapter presents the content and structural arrangements.Chapter II is the theoretical foundation and literature review. This chapter describes the paper's theoretical basis-COSO Risk Management, Basel II bank risk management, Core competence theory.Chapter III is the commercial bank risk management capabilities connotation and dimension analysis. Based on commercial bank risk management and core competence theory, the paper defines the commercial bank risk management capability and its characteristics from a risk management point of view and business competency-based approach to be described. In accordance with Basel II regulatory requirements, risk management ability of commercial banks into credit risk management capabilities, market risk management capabilities and operational risk management capabilities three dimensions.Chapter IV is the identification of the key factors affecting bank risk management capability and its mechanism action studies. Based on the Literature at home and abroad, companying with the deep digging of COSO internal environmental elements, we identified six key factors affecting the risk management capability, and discussed from four aspects of the role between the factors of the mechanism of risk management ability of commercial banks. At the end of this chapter, we proposed 21 hypotheses and established the theoretical models.Chapter V is the methodology and research implementation. Empirical research includes the development of measuring instrument, research questionnaires, sampling plans, distribution of the sample's analyzing, the actual research implementation process, the questionnaire recall, and data editing process. At the end of this chaper, effectiveness of the sample data was described and summarized.Chapter VI is the data analysis and interpretation. According to empirical research data, using SPSS, AMOS and other statistical analysis software, on the scale for reliability and validity testing of the model and the relationship between the various elements of descriptive statistical analysis, correlation analysis and structural equation model analysis, we verified the model assumptions and gave the final interpretation of the empirical research.Chapter VII is the conclusions and prospects for the study. This paper summarizes the conclusions of the study carried out to explain the major contribution of this study and innovation points, as well as shortcomings, and propose further research direction for the future.The main conclusions and innovations in the text are as follows:1. Initially defined the concept of bank risk management capability and analyze its meaning in two dimensions. This study has laid a theoretical basis for further bank risk management research.On the basis of the new Basel Capital Accord on bank risk regulatory requirements; the bank risk management capability was assorted to three kinds: credit risk management capability, market risk management capability and operational risk management capability.2. Identified the six key factors affecting the domestic commericial banks capability. These factors are as follows:the financial supervision,risk management philosophy, risk management strategies, organizational structure of risk management, staff capcaity of risk management, data and IT systems of risk management.3. Innovatively developed the risk management capability instrument and the questionnaire.4. Verified the hyphothesis and reached the following conclusions: Financial supervision and risk management philosophy are the pusing power which has a positive effect on the key factors of bank risk management capability.The key factors has a positive significant effect on the bank risk management capability.Therefore, this research has important theoretical significance and practical value. Commercial bank risk management capability is a term familiar to us all, has repeatedly appeared in newspapers, journals, theories in the study also considers that commercial bank risk management capability is the core competitiveness of commercial banks as one. But what is a commercial bank risk management capability, and what consititutes such a capcaity, has not yet been systematic in-depth study.Based on the bank risk management theory and the core competence theory, we defiend the concept of bank risk management capability, analised the characteristics and composions of this concept. Through financial practice, research and literature review, we identified the key influencing factors of commercial bank risk management capability, supposed the mechanism of action on the factors, built the commercial bank risk management capabilities conceptual model of the key influencing factors, put forward the hypothesis. Through the scale development, questionnaire design, distribution, data processing, structural equation modeling and other empirical methods tested on the conceptual model and its assumptions to be verified. The research results have important values to the theory of risk management and entrepreneurial capabilities. IT's the combination of the theories and actual bank risk management practices.In practice, through the empirical studies, we got some conlusions which will benefit and improve the bank risk management capability in the future. Financial supervison and risk management philosophy have the significant effects on the risk management's strategies set and implementation,on the organizational structure creation and operation ,on the improvement of staff capcaity,on the effective management of data and IT system. The risk management strategy, organizational structure, staff capcaity, data and IT system independently promote the credit risk management capability, market risk management capability, operational risk management capability to a high level. Also, the financial supervision has a positive significant effect on the formation and dissemination of the risk management philosophy.