China's Commercial Banks Operational Risk Measurement Methods And Empirical Research

Along with the announcement of the New Basel Accord, operational risk quantifying model has become a focus of attention in banking industries. But there are still no general techniques accepted by scholars and banking 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.The main object of this work is to give the empirical study based on BIA approach from the New Basel Capital Accord and income model, and present a model for measuring the operational risk of a bank. In chapter 2, we use the statistic tools to study the data of operation risk related to commercial banks in China. According to our analysis, we find that the loss distribution of the severity of operational risk in China subjects to Log-Normal Distribution. Considering the lack of data, we choose basic indicator approach and income model to give the empirical analysis of operational risk in Chinese commercial banks. And, selection of the measurement model for Chinese commercial banks is also discussed. It shows the capital requirement based by basic indicator approach is very large and income model has a better applicability to measure operational risk in Chinese commercial banks. Considering that most income of Chinese commercial banks comes from deposit income, we choose non-performing loans ratio to be dependent variable in this paper. Then, we filter credit risk and market risk and construct a quantitative model of operational risk from a new point of view. And, this paper gives the empirical analysis by the model based on non-performing loans ratio using data from one of commercial banks in China. This paler also introduces some advanced management tools of operational risk and its role to Chinese banking. Loss Distribution Approach is studied deeply, especially in its background, and applicability to measure operational risk in Chinese commercial banks.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.