Commercial Bank Of Operational Risk Measurement Method

The main risks for banking business are market risk, credit risk and operational risk. Internationally, there has been relatively mature research on management of market risk and credit risk, but the research on operational risk management is still in its infancy. In recent years, the increasing incidence rates of operational risk, reputational risk and other non-traditional risks have caused serious economic losses for the financial institutions, which troubled the financial regulators and bank managers. Therefore, the management of operational risk has become a challenge facing the financial world. And now there has been a variety of methods of operational risk measurement. In 2004, the "The New Basel Capital Accord" issued by Basel Committee brought operational risk into the calculation and regulation of risk capital, which marked a new stage of the research on risk management.In China, the financial cases caused by insufficient attention to operational risk occur frequently, and the losses triggered by which are substantial. So the management of operational risk has become a burning question. Seeing this situation, by Bayesian Networks and Analytic Network Process, the paper measures the operational risk of banking business in China.Firstly, this paper reviews the domestic and foreign research status of operational risk measurement of commercial banking, on this basis, illustrates operational risk's the definition, classification, characteristics and measurement methods. Secondly, according to the research results, this paper emphatically researches two major operational risk measurement methods, namely Bayesian Networks and Analytic Network Process, and analyzes the approach and modeling steps which are used when we measure the operational risk by Bayesian networks and Analytic Network Process. Finally, using empirical data, this paper measures the operational risk by Bayesian network and Analytic Network Process, and has made a comparative study, gets the main factors influencing the operational risk, which are internal control, employee quality, complexity of process designing and so on. Research results show that the two methods are applicable to different management departments:Analytic Network Process is more suitable for bank external regulators; the Bayesian Network is more applicable to the commercial banks' internal management.