The New Basel Capital Accord And The Organizational Structuring Of Comprehensive Risk Management On China’s Commercial Banks

By the end of2006, China has opened up the Chinese market to foreign banks. At the meantime, with the vigorous development of China’s economy, China’s commercial banks are no longer willing to confine its business in China, and going out and becoming a world-class big bank is the target of many commercial banks of our country. However, with the absence of a comprehensive risk management system, the stable operating of the bank cannot be guaranteed, let alone competing with the big banks at home and abroad. Therefore, it is imperative to build a risk management system that can timely and effectively identify various risks and can change flexibly as the business changes. The recent financial crisis and the collapses of many large financial institutions reveal that loss is no longer caused by a single risk, but is the result of joint action of various risks. Besides, the commercial banks’ internal risks in different businesses or different sectors may amplify and sometimes may offset. Therefore, banks can no longer deal with risks from a department or business perspective but from a holistic point of view, with comprehensiveness gradually becoming the target for modern commercial bank in building risk management system. The publication of the New Basel Capital Accord happens to provide a good standard for modern commercial banks to build a comprehensive risk management system.In order to change the phenomenon that China’s commercial banks have overemphasized on business while neglect risk management in the past, to enhance the soundness of commercial banks’operating, and to improve the international competitiveness, a main task China’s commercial banks face is to build a comprehensive risk management system, the premise of which is to improve the organizational structure of risk management. This paper is based on the New Basel Capital Accord. After summing up the basic principles of building the organizational structure of comprehensive risk management, the paper comes up with appropriate recommendations for improvement in terms of the four systems of organizational structure of commercial banks’risk management. Finally, the paper theoretically constructs a structure with the risk management department of the headquarter at the core and the business units, subsidiaries and affiliates as branch, hoping to give some suggestions for the risk management of China’s commercial banks. The main content of this paper is as follows:The first part is the introduction. This section describes the research background, the significance of this research, and the current research status.The second part is about the concept and theoretical analysis of comprehensive risk management. This section firstly gives a brief introduction on the background and content of a comprehensive risk management, then analyzes the difference between commercial banks’comprehensive risk management and traditional risk management, and finally briefly introduces the concept and basic mode of organizational structure of risk management.The third part briefly introduces the background and main content of the New Basel Capital Accord, inductively analyzes its related provisions, and concludes the five principles for building a comprehensive risk management organizational structure.The fourth part taking the five principles of comprehensive risk management organizational structure as a standard, analyzes the current situations and existing problems in the risk management organizational structure of China’s commercial banks.The fifth part briefly introduces the comprehensive risk management organizational structures of Citigroup, Wachovia and the Australian Federal Bank, and analyzes the embodiment of five principles in the comprehensive risk management organizational structure of the three banks and the lessons derived from them.The sixth part starts from the commercial banks’four systems of comprehensive risk management organizational structure, comes up with suggestions for improvement for each system respectively, and finally distinguishes the differences of risk management process between the new comprehensive risk management organizational structure and the traditional one.