The Research Of Commercial Banks’ Operational Risk Metrics And Controls In China

All the commercial banks in China are not familiar with operational risk both in theory and practice, even though it is born with them. Not only our knowledge of the operational risk, but also the management and control, are still limited. However, since CBRC carried out the Motion of Strengthen the Work of Anti-operational Risk in2005. commercial banks in China gradually pay attention to operational risk management. This paper is written to make the whole community have a deeper understanding of operational risk through the research on the mechanism, identification, measurement and control of operational risk in commercial banks. Meanwhile it is helpful on the implementation of operational risk management from institutional and technical level of commercial banks in China. The empirical part provides the basic methods and criteria for stakeholders of the bank by means of publicly available data to quickly calculate the operational risk value. It also has a very important practical significance on determining an adequate capital, founding a sound operational risk management system and developing a more advanced management system of commercial banks in China.This paper, using the combined approach of both normative analysis and empirical analysis, mainly discusses the research on the operational risk in four aspects:The first part is called the Reason of the Operational Risk. By using the psychological theory and game theory models, I try to find out people’s motivation which leads to the operational risk; the second part is called the Recognition of Operational risk. I introduce the recognition standards of operational risk and key risk indicator approach; the third part is called the measurement of the operational risk which specifically elaborates Basic indicator approach, Standardized approach, Advanced measurement approach and other measurement models of operational risk; the last part is called the Control of Operational Risk. I explain the aim of the control, and the application of insurance and outsourcing technology in real world. This paper clearly states two conclusions:One is that all the commercial banks should attach more importance on the management of operational risk; the other, is the governance of operational risk should be multi-pronged, single from a particular aspect of governance can only be futile.