Studies On Operational Risk Of Domestic Commercial Bank

Since 1990s scandals of the top global commercial banks broke up one after another. In January 2008 rogue trader scandal of Societe Generale broke, which led to the loss of up to 7.2 billion USD and put the bank at the verge of collapse. Cases of similar character happened in China. For example, in April 2007 the treasury custodian with Agricultural Bank of China Handan Branch stole 51 million Yuan, which was the biggest amount of cash being stolen in banking sector in China.It can be noticed that commercial banks home and abroad are confronted with severe operational risks, which will lead to losses as heavy as that of market risks and credit risks. Nonetheless, the study on credit risks and market risks is conducted far better in China in comparison with the study on operational risks. Banking sector in China has long been attaching little importance to operational risks and a scientific management system need to be put in place badly as identification, measurement and management of operational risks are far from perfect. To this end, the article which makes study on operational risks in commercial banks is of great significance both in theory and in practice.The article consists of three parts. Part One specifies the identification of operational risks in commercial banks in China from the perspective of its concept, classification and formation mechanism to clarify what is the operational risks. Part Two focuses on the measurement of operational risks and make clear how severe the operational risks would be through measuring operational risks by means of statistics on loss data and capital measurement. Part Three delivers solutions on how to manage operational risks which underlines strengthening internal management by taking measures such as prevention, in time resolution and transferring operational risks. It puts forward suggestions on operational risks management in commercial banks by identifying and measuring operational risks and discussing measures of control of operational risks.