The Research On Banking's Operational Risks

The risks of financial industry especially the banking industry can be divided into credit risk, market risk and operational risk. These days, the theories and models for credit risk and market risk have already been mature. However, the operational risk was arise people's attention only since the 90's of last century. From that time on, the international circles transfer from a simple credit risk management into an overall risk management, including market risk and operational risk management, and has called special attention to the fatal influence exercised by operational risk on the banking industry. As an authority in the risk management in international banking, The Basel Committee on Banking Supervision issued Basel II in July, 2004. To achieve a quantitative management for operational risks, the Basel II proposed three methods to measure operational risks: Basic Indicator Approach, Standardised Approach and Advanced Measurement Approaches.Meanwhile, some major cases related to inside and outside cheat, personnel violation operation, moral hazard have caused serious damage to Chinese banking industry. Therefore, how to correctly understand the operational risk, use the international advanced risk management for reference, establish the scientific risk management and elevate the level of risk management have already been the impending problems of our banking industry.This paper mainly works over on the operational risk of banking, under the framework of Basel II. On the basis of definition, sort and characters of the operational risk from Basel II, attempts are made to calculate the capital allocation in operational risk for CMBC and CBC, two banks in China that have gone public, according to the Basic Indicator Approach and Standard Approach suggested in the Basel II. Afterward, the current conditions of operational risk management in China, including the problems and the causes, such as moral hazard, bounded rationality and technology of information are analyzed. The last part is composed of some suggestions and solutions for choosing proper methods for Chinese operational risk management, focusing on two parts.