The Research On Operational Risks Of China's Commercial Banks

Risk management lies at the heart of the financial service industry. Since late 90s, operational risk has become the hot topic for foreign banks and financial supervisors. The Basel II Capital Accord of 2004 set guidelines on capital requirements for operational risk, which promoted the development of operational risk management.In China, most Chinese commercial banks didn't pay much attention to operational risk management until the early of 2005 when many large financial scandals were reported. Their focus on credit risk management and lack of scientific operational risk management are the main reasons for those cases. In order to reduce such cases and improve the competitiveness of Chinese commercial banks, they should take operational risk as an important risk type. They have to make great efforts to find the most suitable method to manage operational risk.In China, the weak awareness of operational risk of practitioner in bank, behindhand methods of risk management, as well as the lack to experience have led so many occurrences of case caused by operational risk, which make China so much economy loss and furthermore affect both social image of bank and the normal social order. As a result, how to take a correct attitude to operational risk and to establish a operational risk management system based on advanced management experience and lessons from failure to improve the operational risk management, become a problem, which should be solved as soon as possible.This paper begins with the research of operational risks insome active banks in the developed countries to get the rough idea of the meaning and contents of operational risk, the general features by selecting and analyzing the typical operational risk accidents. Meanwhile we tried to explain the internal theoretic mechanism. Based on the classifying standard and research method of operational recommended by Basel Council, we analysis the statistics of operational risks aroused in our commercial banks. Through the work, we compare the research findings and find out the same reasons resulting in risks domestically and abroad, including moral risk, internal control, the design of process and the negative effect brought by the development of information technology. Then the author addresses the status of operational risk of commercial banks in China and the problems in operational risk management, points out the defect in management of commercial banks' operational risk management in China. At last, countermeasures are put forward from the aspects of framework, process and quantification of operational risk management.