The Modern Bank - Wide Risk Management

The enterprise-wide risk management (ERM) of the bank is the risk management revolution initiated by the large banks of foreign countries in recent years. It focuses on the entire management and measure of all bank risks, such as credit risk, mobile risk, interest rate risk, market risk, operating risk and dischargerisk, etc. It adopts the unified measuring standard to all risks-value at risk. (VAR),and then measures capital at risk (CAR) which is used to resist the whole unexpected loss of the bank on the base of VAR of all risks, and correlates risk with income to calculate the risk adjusted return on capital (RAROC) to evaluate the outstanding of banks. The ERM system is set up on the basis of these three technical indicators. Fund transfer pricing system and capital assignment system is the concrete organizing method of ERM, which are responsible to the collecting and transmitting signals between leading group and basic unit and among every business segments inside the bank. At present, foreign banks have already set up relatively perfect mechanism of ERM, which includes risk management strategy, risk administrative system, the measurement, report and control of risk, operation of risk management and information system of risk management. They have looked on risk management as strategy. Risk management tends more and more measurization, modelization and informationization.Our country is a developing country. The economic environment is comparatively complicated and special. The banking development is still very unripe. And the expressions of bank risks are special too. It has put forward higher and special requests to pursue ERM in the banks of our country. The commercial banks of our country have already begun to develop ERM. But because its historical limitation, it still has very great disparity with the foreign banks in ideas, technologies and methods, etc. In order to pursue ERM reform in our country, the commercial banks of our country must set up and amplify the management system of bank risk, and learn to grasp advanced risk measuring technology and informationtechnology, cultivate advanced risk management culture and create good external environment condition.