The Exploring On Domestic Commercial Bank's Operational Risk Management

Modern commercial banks are facing various risks, management of which, as the core competitiveness, is the key to their success. In Basel II, risks are divided into three categories: credit risk, market risk and operational risk. The first two categories have been given sufficient attention to, a set of management concepts and models being in operation, while the third category, operational risk has just won its respect after being neglected for long. With the faster global economic integration in the past years, banking businesses have been expanding themselves in scope and scale. Consequently, the operational risk becomes an imperative problem to commercial banks. Operational risk has caused so many serious cases across the globe that Basel Committee stipulated in Basel II (June,2004)that the operational risk should be covered and a proportion of capital must be set side for the purpose of its prevention.Compared with the foreign commercial banking, Chinese commercial banking paid attention to operational risk later, the management of operational risk has just begun and been regarded just in recent years. Thus, there is not an overall, systematic understanding to the operational risk. In that case, no matter management concept, management structure, or management measures of operational risk, all of them are defective and become the main obstacles in the management of operational risk of domestic banking. At the same time, the weak awareness of operational risk of practitioner in commercial banks, 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 commercial bank and the normal social order. As a result, how to take a correct attitude to operational risk and to establish an operational risk management system based on advanced management experience and lessons from failure to improve the operational risk management, become a problem to domestic commercial bank, which should be solved as soon as possible.Firstly, the thesis expounds the definition, the sorts and the characteristics of operational risk, and the development process, the principle, the quantitative methods and the basic process of management of the operational risk. According to the concrete manifestation the paper points out the internal reason and outside reason to operational risk of our banking, which indicates the importance and urgency of strengthening operational risk in our banking. Subsequently, analyses the status and the problems of management of the operational risk of domestic commercial banking, and prospects its future development trends. On this basis, the fourth part of the thesis constructs the framework of management of the operational risk of domestic commercial bank from internal construction and external oversight two levels and seven content, suggests the improvement path of management of the operational risk of domestic commercial bank.