Study On Measurement Of Commercial Bank’s Operational Risk

Recently, under the influence of financial globalization, product innovation andderegulation, operational risk events of banks frequently happened in China and abroad,and operational risk has become the focus of risk prevention for commercial banks. Insuch circumstances, how to strengthen operational risk management has become mostimportant, whose key lies in using reasonable risk measurement methods to calculateoperation risk exactly. However, owing to the fat tail of operation risk and lack of lossdata, there is no measurement of operation risk that could be widely accepted until present.In the absence of data, the credibility theory in non-life insurance can well combineinternal and external data in the insurance. Thus, the paper uses the credibility theory tocalculate operational risk and deduces the credibility model of operational risk to combineinternal and external data of commercial banks. In addition, according to the Basel accordproposal, commercial banks should calculate operation risk capital of each operation riskcell which classified by business line and risk type and consider the dependency ofoperation risk cells to calculate operation risk of banks. In the measurement of eachoperation risk cell, aiming at the fat tail of operation risk, the extreme value theory is amore ideal method, for the reason that the method is specialized in measuring the tail riskand it deals with the tail of loss distribution directly. On the other side, in the summingprocess of capitals of operation risk cells, directly summing method without considerationof risk dispersion effect of cells would cause the operation risk capital calculated is morethan the practical needs, which would seriously restrict the development of banks.Furthermore, the traditional correlation analyse method, such as linear correlation, couldnot depict the nonlinear and asymmetry relationship of operation risk to reflect thedependent frame of operation risk. Therefore, the paper uses Copula to capture thenonlinear dependent frame of tail of operation risk to better reflect the risk characteristicsof commercial banks. The study shows that consideration on dependency of operation riskcells with Copula can greatly reduce operation risk capital that required, meet the riskdispersion effect of asset portfolio and provide commercial banks a better way to get moreprofits. Moreover, according to the actuality and existing problems of operation riskmanagement of Chinese banking, the paper put forward some feasible improvementmeasures, including perfecting the banking management structure, establish effectiveinternal control system and scientific risk-index system, strengthen cultural construction of risk management, establish long-term mechanism of operation risk management,construct security and efficient IT system and improve external supervision level.