The2007US Subprime Crisis drew the world’s concern on the commercialbanks’ risk management issue. Accordingly the Basel Committee’s Principles forEnhancing Corporate Governance and Basel III were to improve the commercialbanks’ internal controls and risk management capacity. At the meantime the Chinesegovernment also carried out new banking policies, emphasizing the board’s ultimateresponsibility for the risks.The analysis of the theories on the relation between the commercial banks’corporate governance and risk management shows that appropriately handle therelation between the board members’ effort, performance, reward and individualobjectives can reduce moral hazard and adverse selection of the board members, andinduce them to balance their performance and risks. Reviewing the development ofChinese commercial banks’ corporate governance and risk management in we cansee that Chinese government implemented stricter supervision standards than BaselⅢ.The existing literatures about the relation between the board governance andrisk management point out that efficient corporate governance as well asappropriately increasing the portion of independent board member and female boardmember can significantly improve the commercial banks’ risk managementcapability. There is no coherent opinion about the impact of the board size andcombining chairman and CEO into one position on risk management.Single, multi-angle and full-scale Risk Management Capability AssessmentCriterion were mostly used to assess the risk management capability of commercialbanks. In this paper, basing on theoretical analysis, Basel III and AdministrativeMeasures for the Capital of Commercial Banks (for Trial Implementation), we builta factor analysis model with credit risk, liquidity risk, market risk, capital controland operational risk as the risk factor. According to the synthetical score which came from the model, we could measure commercial banks’ capability of risk management.Regarding structure features of director board, features of stimulating, features ofbehavior as three dimension of board governance, we built models to study therelation between board governance and the capability of risk management.Results of the empirical study reveal that commercial banks’ capability of riskmanagement have been being enhanced year by year since2009, but the capability tomanage and control the risk of exchange rate still need further improvement. It isalso clear that the size of the board, portion of independent board member, whetherthere was a CRO or not, share option of board members as well as the frequency ofboard meetings can significantly enhance the commercial banks’ risk managementcapability. On the contrary, the integration of chairman and CEO weakens the riskmanagement capability. The portion of female board members and whetherindependent board members are present in person at board meeting failed tosignificantly influence the capability of risk management, which shows that theabove mentioned two factors have limited impacts on strengthening the commercialbanks’ risk management capability,and the formalism is existed. Results ofsignificance test shows that director’s remuneration and allowance of independentdirector were not necessarily linked with commercial banks’ capability of riskmanagement, which is in accordance with the expectancy theory. |