Measuring Operational Risk Of Chinese Commercial Bank

Operational risk is one of the main risks faced by commercial banks. It has anupward trend in both the frequency of occurrence and loss amount. Especially withthe commercial banks market-oriented reforms and the pace of opening to the outsideworld is accelerating, the operational risk faced by commercial banks in China isbecoming increasingly sophisticated. Therefore, it is necessary to study foroperational risk management of commercial banks in China.For the study of this issue, the logical starting point is how to measureoperational risk. In particular, relative to a better operational risk measurement systemwas established in Western country, our research in this area is still infancy. China’scommercial banks lack the incentive of information disclosure, resulting in the lack ofrelevant data, so we need to find out operational risk measurement methods andmodels, which is suit to Chinese commercial banks.Starting from the extreme value theory, a detailed mathematical derivation of theBMM model and POT model was established. We analyze their advantages anddisadvantages and applicability of the BMM model and POT model. It is moreapplicable for Chinese commercial banks to imply the POT model for its higherefficiency in the use of the data. This article is collect and organizes the operationalrisk loss data published by media, and use the POT model estimates the risk ofcommercial banks operating in China.