| With the deregulation of financial service, the ever changing financial innovation and application & development of information technology in financial industry, business activities of banks and its operational risks have become more and more complex. Many major bank deficits, such as Barings Bank collapse and Bank of Japan's bonds, directly related to operational risks. Practice has shown that operational risk is more widely distributed in all aspects of bank management than credit risk and market risk, and it has made more loss to banks. The objective existence and the increasing number of operating risks promoted financial institutions to strengthen their monitoring system. Upon this problem, Basel members wrote some rules in the New Basel Capital Accord. Operational risks and credit risks, market risks have been incorporated into the regulatory framework of financial institutions. The capital should be equipped with the Operational risks. This is the reflection of the growing emphasis on operational risk management international financial industry. And also it is the new requirements of operational risks that can help manage comprehensive risk and maintain the stability of the banking system.China Banking Regulatory Commission held a special emergency meeting on the control of operational risk in March 22, 2005. The president of State-owned commercial banks and joint-stock commercial banks participated the meeting. The commission required various commercial banks to strengthen their management and issued the "Notice on China Banking Regulatory Commission intensifying efforts to prevent operational risk". In this notice the CBRC clearly put forward the concept of operational risk. Though the CBRC indicated that, at least Group of 10 carried out the NewBasel Capital Accord in 2006, China would continue to implement the 1988agreement in recent years, which means that the domestic banking needn't toallocate capital for operational risk and put in a lot of resources like some ofthe international active banks. But the situation of operating risks faced by theinternational banking is not optimistic, especially in the backdrop of financialglobalization, China promised to completely open RMB business to theoutside world under the terms of WTO. China's commercial banks shouldeffectively solve the problems of operational risk .It not only affects thesurvival and development of China's commercial banks but also influencesChina's financial security and economic security. This paper researchesoperational risk of commercial banks from the perspective of both the theoryand practice.Theoretically speaking, this paper has positive significance to enrich and develop the theory of financial risks such as the theory of commercial banks' risk. Operational risk is an important component of the banking system risks. Its mechanism, compensation mechanism and control methods have distinct characteristics. However, over a long period of time the theoretical study of the commercial banks' operational risk lagged behind .There is not an authoritative and scientific theory framework. Therefore, it has become imperative that we should have a correct understanding of the definition of operational risk, establish a comprehensive, effective operational risk management framework and select the appropriate measurement of operational risk.Practically speaking, there are some problems in the current situation of China's commercial banks' operating in the risk management. For example, unclear opinions, ambiguous concepts, blindness, serious short-term, plus the lack of risk control measures, etc., all of which lead the frequent operational risks in the bank. It should be controlled. This paper analyzes the problems of commercial banks operational loss. It also put forward measures to control operational risks and reduce them. This has a positive value to guide commercial banks to develop operational risk management and control the occurrence of operational risks.In this paper, the organizational structure adopts ways which are from general to particular. Introduction uses the data to discuss the significance of commercial banks' operational risk. Meanwhile, it makes a review of the development of the Basel Capital Accord and related literature. The main part of paper discusses operational risks in detail; the specific structure is as follows:Part one outlines the theory of commercial banks' operational risk. First,define the basic definition of operational risk. With a relative clear concept ofmarket risk and credit risk, the definition of operational risk is anever-expanding concept. The New Basel Capital Accord gives the concept ofoperational risk. It is economic losses which are caused by the internalimperfect operation process, human error, system failures or external factors.Secondly, the category of operational risk. According to the New BaselCapital Accord, operational risk losses will be divided into seven types. .It isbased on the type of business and loss of events. Thirdly, the analysis of thecharacteristics of operational risk. As a multi-risk pool concept, thecommercial banks' operational risk has different characteristics with otherrisks. Finally, on the basis of senior micro-economic theory the paperdiscusses operational risk. It has commissioned-agent dynamic game for thedesign of incentive system and non-symmetric zero-sum game model forincentive paradox. In part two, there are measurement methods of operational risk in the New Basel Capital Accord. The paper has given the concept of operational risk. The key content is that how to use appropriate methods or model for measuring operational risk, then extract the corresponding capital. The New Basel Capital Accord takes the operational risk into risk management framework, poses the measurement of the operational risk, namely, the basic indicators, high standards and measurement, and asks commercial banks to allocate corresponding capital for operational risk. This paper introduces each of the measurement methods and makes the corresponding evaluation, discusses the applicability and standards of the various methods for banks. Finally, there are a comparison of various measurement methods and its applicability for China's commercial banks. This paper's view is that the standard is a very good transition. China's banks should quantify short-term direction of operational risk management. Senior quantitative measurement of operational risk management is bank's ultimate goal.The third part introduces the experience of Deutsche Bank's operational risk management:Currently, the operation of the international banking risk management is still at an exploratory stage. The paper analyzes into three areas through studying Deutsche Bank. The commercial banks should create a good atmosphere for operational risk, make organizational structure which conforms to the overall development strategy of banking risks and establish detailed processes of operational risk management.The fourth part is the current situation of operational risk in China's commercial banks and genetic analysis. Since the beginning of reform and opening up of China, commercial banks have scored rapid development. But in the economic transition period, laws and regulations are not perfect. The irregularities and fraud occurred in commercial banks. Meanwhile the management of commercial banks is relative backward and lack of management experience. The software and hardware are not advanced enough. The capacity to found crisis and deal with crises is relatively lower. That leads to exposure of commercial banks operating in a tremendous risk. Based on data collected by the media reports and some scholars' study results, the operational risk in commercial banks is mainly from the bank's internal fraud, external fraud and collusion between internal and external personnel in the fraud. This paper analyses the causes of operational risk, including imperfect corporate governance, unestablished risk management culture, lacking of internal control mechanisms, imperfect risk management system, methods and staff management team and check conflicting with the risk-control policies.The fifth part analyses the strategy of operational risk management in commercial banks. Based on The New Basel Capital Accord, the paper made a number of recommendations. Commercial banks should increase the overall reform, establish and improve the system of the operational risk management, strengthen internal control mechanisms, implement operational risk management and improve operational risk management methods. |
PDF Full Text Request