Commercial Bank's Credit Operational Risk Measurement And Prevention

In the financial globalization and under the financial liberalization's development background, more and more sophisticated financial technology trigger a variety of operational risk, so the international financial community began to re-examine operational risk. In'the New Basel Capital Accord' published in 2004 operational risk has been identified in the risk management of commercial banks in an important position, which pushed the development of operational risk management. Because the study on operational risk is late in our country and the management level is lagged, operational risk incidents happen frequently in our country. Operational risk increasingly becomes the main risk faced by banks in China. So, how to improve operational risk management level and prevent operational risk on the basis of improving operational risk measurement techniques is the urgent task of our banking. Under the background it has weighty significance to study operational risk measurement of our banking.In various operational risk, the credit operational risk loses occupies the comparison of various operational risk loss biggest. The Paper employs the method of combination of qualitative and quantitative analysis. Firstly, the paper expounds the connotation, the sorts and the characteristics of 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.The performance of operational risk management depends on the effectiveness of the model. International professional bodies and scholars have put forth many kinds of operational risk measurement models and methods. According to the different prospects, the model of measurement of operational risk can be divided into Top-down Approaches and Bottom-up Approaches.Bottom-up Approaches focus on every single commercial bank or say from micro prospects. Bottom-up Approaches mainly include Scored Approach, Internal Measurement Approach, Loss Distribution Approach, Extreme Value Theory. Scored Approach which employs the method of combination of qualitative and quantitative is the more common method of western countries. The greatest shortcomings of this approach is that over-reliance on subjective judgments of experts. Internal Measurement Approach is more accurate and targeted. But it also has disadvantage. Firstly, it is based on the assumption that there is a a stable relationship between expected losses and non-expected losses, which do not meet the actual situation of loss distribution. Secondly, the conditions of using of this method is stringent. Thirdly, this method requires a large number of data. The using of Loss Distribution Approach and Monte Carlo Simulation based on a series of strict conditions and need a large number of data. The requirement is precisely the biggest problem of commercial banks in China. Top-down Approaches mainly focus on the general target of banking industry, for example net income etc, which is used to measure and manage operational risk from macro prospects.Systematically and entirely analyses the advantages and disadvantages of operational risk measurement methods and the applicability in our country, which is the qualitative part of the article. Then we choose BIA and more appropriate to the current situation of China's commercial banks of the Revenue Model to measure credit operational risk. By establishing income model and using the public numbers from commercial banks, we make the empirical analysis of commercial banks' credit operational risk and then at last take the calculation of venture capital. By income model one of the top-down models measuring the operational risk, the paper focuses on empirical analysis of two commercial banks in China and establishes the relevant relations between the net income and the rate of bad debts and the economic growth from the macro perspective and finally gets the result about the calculation of venture capital. It shows that to some extend income model can reflect the operational risk and our country is faced with the serious operational risk. Then comparing the outcome of Revenue Model with the results of BIA. It shows that there is consistency between the two measurement models, and the Revenue model is more accurate than BIA model. At last, the paper makes some suggestions about the measurement and management of credit operational risk in China.Banking is an industry operating risk. Its core competitive ability lies in the risk evaluation and management. What's more, the risk evaluation conditions of banking directly affect the stability of financial system and the society. By the quantitative researches on operational risk in China, our banking can form correct operational risk management ideas; strengthen operational risk measurement consciousness; gradually build up operational risk management system and improve operational risk management level, which is help to realize the leaping development of operational risk management.