Study Of Commercial Bank Operational Risk Management Methods

Risk management is always regarded as an important task by commercial banks. The scientific and effective risk management can not only make sure banks run persistently, but also reduce fund cost of banks to withstand the loss of risk. Presently, there are mainly three kinds of risk faced by commercial banks: credit risk, market risk and operational risk. However, commercial banks pay much more attention to credit risk and market risk than operational risk, which is becoming more and more serious in recent years. In June 2004, Basel Committee promulgates the New Basel Capital Accord formally, which requires banks taking operational risk into account when calculating the economic capital. The banks in China have not have enough knowledge about operational risk whereas the loss from operational risk is huge in these banks. As a result, the research on measuring and managing operational risk has its special importance in China.Firstly, this thesis analyzed the definition of operational risk profoundly and distinguished operational risk from credit risk and market risk. Secondly, this thesis introduced experience of foreign advanced banks. Thirdly, this thesis introduced quantitative and qualitative models in operational risk management systematically and I believe that Scorecard Approach is the best choice for commercial banks in China. Then this thesis took the example of Guangdong Development Bank (GDDB), Hangzhou Branch, which I had been investigating for a week. This thesis introduced how Hang Zhou Branch of GDDB managed operational risk and found out that they didn't set up framework of operational risk management and did not have proper method to calculate the loss of operational risk. Lastly, the thesis set up the framework of operational risk management and calculated the loss of internal fraud by Scorecard Approach and Bayes method. The results I got accords with the fact basically.