Study On Operational Risk Of State-Owned Banks

Credit risk, market risk and operational risk are the three major risks that banks face. Credit risk and market risk have received extensive attentions and studies while the operational risk has recently been studied. The reasons that caused operational risk are very numerous and the manifestations of the operational risk are also various. Therefore the study on operational risk is very hard. The existing studies mainly focused on discuss about the definitions and types of the operational risk and there are also many studies on the analysis about the measurement methods for operational risk. However, the people are the main factor that caused the operational risk so we believe that the defects of bank institution are the main causes of operational risk. Based on the corporate governance theory, this paper studies the operational risk of State-owned commercial banks. We find that operational risk has caused much loss for the State-owned commercial banks. Among the five State-owned commercial banks, we find that the frequency of operational risk in bank of communications is the lowest and the magnitude of the operational risk is also most lost. But the Agricultural Bank of China faces the most serious operational risk. Among the various styles of operational risk, the most frequency operational risk is caused by internal fraud, which demonstrates the improvement of corporate governance of State-owned commercial banks is so important. For the corporate governance, we discuss the problems of corporate governance in State-owned commercial bank from the ownership structure, the structure of Board of Directors and Board of supervisors, executive incentive perspectives. Based on our analysis, we proposed some policy proposals for improving the corporate governance of State-owned commercial banks in China.