The Measurement Analysis Of City Commercial Banks’ Operational Risk Based On Income Model

As an important part of China’s banking industry, City Commercial Banks (CCBs) has developed rapidly in recent years and has played an increasingly important role in the economic and social development. However, there are many problems and difficulties with the rapid development of the CCBs. Due to the excessive pursuit of expanding the scale and inadequate risk control system,CCBs’risk events occurr frequently in recent years, of which operational risk account for a large proportion of cases in the various events. We hope thatpromote the development of operational risk management level enhancement through the study of CCBs’ operational risk.By the summary of the theories of operational risk management and the management situation of CCBs’operational risk, the paper analyzes different measurement methods of operating risk and then select income model to measure the level of the CCBS’operational risk. The data is from annual reports of31city commercial banks from2008to2011, and the selection of indicators is based on core regulatory indicators of commercial banks. Then using income model,the paper selects indicators including real GDP growth rate, capital adequacy ratio, ratio of non-performing loan, concentration of loans, difference of one-year deposit and lending interest rates, difference of the five-year deposit rates and three-month deposit rate, liquidity ratio, loan-to-deposit ratio, to make the panel regression analysis, and estimates the level of CCBs’operational risk overall. Then, according to the relevant provisions of the Basel Agreement,the paper calculates the proportion of the operational risk value accounted for net capital of five city commercial banks, and summarizes the empirical process and conclusions. Finally, the paper make a comparative analysis of empirical conclusions of CCBs’ operational risk and income model results of other banking, and put forward to suggestions to strengthen the operational risk management of City Commercial Banks.