Operational Risk Of Commercial Banks In China

Rapid developments of the financial industry and significant changes occurring in the business environment of the banks have caused a great deal of operational risks. In recent years, there have happened a series of major losses in the financial industries both at national and international levels. Therefore, operational risk as an independent risk pattern faced by the financial institutions has increasingly aroused the great attention of the regulators and the professionals. In practice, the banks are confronted with operational risks with various sources and high frequency.It is the precondition for research to fully understand the operational risk due to the complexity of its origins, sources and forms. This paper systematically analyzes the prior works achieved by the professionals and the regulators of the international banks. This article also ravels out the key impacts brought by the Basel Committee's banking supervision framework upon the operational risks and discusses the theories regarding the operational risks.Operational risk is a typical risk pattern of the national banks. Consequently, proper measurement of the operational risk has become imperative. Effective measurement of the operational risk is very important and challenging. Two available methods are top-to-bottom measurement and bottom-to-top measurement. These methods have their respective advantages and disadvantages and should be applied in different situations. The current studies on the operation risks mainly focus on the top-to-bottom method.In respect of the measurement of the operational risks, this paper concentrates on three kinds of top-to-bottom method, which relate to basic index, income model and security-related model. This research makes a positive analysis based on the annual data of some famous listing banks between the year 2001 and the year 2010. After this paper's study, it can be concluded that the results gathered from those three sub-methods vary largely but have a relatively consistent mode.