The Analysis Of Integrated Framework And Case Of Domestic Commercial Banks' Internal Control

With the globalization of the financial industry, the emerging of macro financial risks and the international conduction mechanism getting its new characteristics, our domestic banking industry is facing more opportunities as well as greater risks. Internal control has already become a dynamic process and system to ensure commercial banks to achieve their operating objectives. It is therefore worthwhile to study domestic commercial banks'internal control under the new supervision environment. This article first introduces the basic framework of commercial banks'internal control, arguing that the objective of the commercial banks'internal control is the effectiveness and efficiency of loss avoidance with the capitals and other resources they own. This objective determines that the basic principle, the integrated framework and the five interrelated components of internal control must be closely intertwined with the whole process of commercial banks'operations management. The article examines the development of regulations and theories of internal control among banks home and abroad, investigates the necessity and urgency for commercial banks to provide reliable financial report and effective internal control, and explores the demands of new supervision environment towards commercial banks'internal control. This article presents the basic content of improving commercial banks'internal control systems, and puts forward the key methods including the strengthening of commercial banks'administration structure, the emphasis on the cultivation of internal control environment to give employees the right attitudes and initiatives, strict examination of banking strategy to ensure the consistency between operation objectives and corresponding strategies, more attention to the regulation risk of internal control, elimination of risk sources, enhanced supervision of internal control of new business line under new supervision environment, proper balance between control effect and control cost to achieve the best result with least resources. The article makes comparison across our domestic commercial banks from the five interrelated component of integrated framework including control environment, risk assessment, control activity, information and communication and monitoring, analyzes the influences of financial globalization and supervision's internationalization on commercial banks'international strategies. The article then gives the detailed implementation measures for improving the internal control mechanism. This article takes a microeconomic perspective and the study is on the basis of substantial evidence. The article analyzes the application of the theory of internal control integrated frameworks in commercial banks with a case study. The conclusion part summarizes the status and prospects of the domestic commercial banks'internal control systems.