Operational Risk Management Research Of Commercial Banks In China

At the end of last century, when most banks and Basel committee still paid attention to credit risk and market risk, an event——Bahrain bank went to bankrupt shock them, and largely changed their opinions. This event warned global financial organizations against operating risk which is one of the biggest risks. From then on, people treated operating risk seriously and Basel committee finally put this factor into consideration in Basel II Accord.Basel committee decreed Basel II Accord at 26th April, 2004. Basel II Accord requires quantifying operating risk and put it into capital supervise requests. The Accord brings forward highly effective and widely used methods to measure operating risk. It requires financial organizations have corresponding capital for operating risk and established a series of standard to measure whether an organization is qualified to use the methods. This embodies international banking supervise idea and latest risk management fruits.In China, although there still are some problems of credit risk management, it has arisen enough attention. Researches of market risk are quite effective. But till now, Knowledge of operating risk is limited. Many supervisors think credit risk is main risk in banking sector. But when we analyze further we can find that lots of credit risk are caused by illegal operation. There are many cases can show us this. Since 2005, some shocked financial cases happened in China. Later, China Banking Regulatory Commission (CBRC) decreed . It requires banks adopting effective methods to control and prevent operating risk. That was a representational event showed Chinese banking sector pay attention to operating risk. Quantify operating risk is an advanced practice in international banking risk management. It is a trend of bank operating risk development. Therefore, making an intensive study of operating risk quantification is very important. It in some extent influence Chinese commercial banks'future competitiveness. Because of the practical significance, it is essential for us to do research on bank operating riskThis thesis begins with banks suffered huge loses because of operating risk. Then define operating risk in commercial banks, introduce some methods of operating risk measuring. After introduce and analyze reality of Chinese commercial banks'operating risk management, the writer bring forward a series of policies about how to manage commercial banks'operating risk in China.Chapter One: categories of operating risk and its characters. After making a reference to many literatures home and abroad, taking a deep consideration of the reality of China's commercial banks, the writer thinks the definition of operating risk by Basel Committee is the best one and it is also the unified standard. At this part, the writer introduces Basel Accord and other famous international financial organizations'description of operating risk in detail.Chapter Two: measuring methods of operating risk. The writer makes a systematically exposition of measuring methods of operating risk. At 1998, Basel Committee began to pay attention to the influence of operating risk. At June 1999, Basel Committee publicized Basel II Accord (draft). Thereafter, on the basis of views of different countries'banks and Banking Regulatory Commissions, Basel Committee publicized second draft and third draft. The final draft was publicized at 26th April, 2004. In the final draft, Basel II Accord includes Basic Indicator Approach, The Standardized Approach and Advanced Measurement Approach.At this chapter the writer not only detailedly and definitely introduces Basic Indicator Approach, The Standardized Approach and Advanced Measurement Approach, but also makes a brief explanation of VAR which fits China's reality. Also, the writer points out characters of these methods and different through contrast. It makes reader can easily find the advantages and disadvantages of these methods in practical use.Chapter Three: current situation of China's commercial banks'operating risk management. Operating risk takes a vast scale in commercial banks risk management in China. So it is pressing to reinforce operating risk control. First, we the writer analyze operating risk's characters, actualities and origins. From the actuality we can find that there are some bugs in commercial banks operating risk management, such as lagging risk management idea, immature operating risk control culture,unsound operating risk management system and single operating risk control means. The writer analyzes causes of formation.Chapter Four: how to reinforce commercial banks operating risk management. On the basis of definition of operating risk in Chapter One, the writer emphasize commercial banks should collect data, prepare enough human resources, chose certain former. And secondly the writer thinks the banks should improve internal control level. Through establishing reasonable management system and internal audit system etc. to reinforce operating risk management. Thirdly, establishing a consummate operating risk management circumstance and forming a good operating risk management culture are also very important. The writer thinks the top management team of bank should use some effective measures to control the operating risk and do it as a model. At last, according to Basel Committee's suggestion to treat insurance as a technology to lessen risk, the writer think using insurance to prevent risk is an important means.At present, China's financial market has opened its door to foreign capital banks. It must increase the competition. On the research of bank operating risk management, the thesis has the following innovation:1. Bringing forward the suggestion of using insurance to lessen bank operating risk. Some traditional measures are taking some passive means to prevent risk. But the effect is so limited and un-multiple. When bring insurance to operating risk management, some risk are passed to insurance companies. Using insurance is always an effective way to control and pass risk.2. Emphasize total management principle in operating risk management. Operating risk exist in every procedures of operating. Besides constitute a reasonable regulation and risk supervisor procedure, foster operating risk management culture and establish healthy operating risk management circumstance are also essential and important.The writer analyze bank operating risk research result and cases home and aboard, use the knowledge learned in postgraduate study, try to probe into the operating risk management. It is aim to prepare some theoretical principle to Chinese banks'operating risk management.