Commercial Banks Cross-border Renminbi Settlement Business Operations Risk Management

With the growing strength of China’s economy, RMB internationalization hasbecame a hot topic. But it didn’t make many substantial progresses until the globalfinancial crisis in2008. After financial crisis broke out, People began to realize thedisadvantage of overdependence on dollars. At the same time, RMB gained a goodpublic expectations and reputations because of its stability in the world. Chinesegovernment also seized these opportunities to accelerate the pace of RMBinternationalization. The key step is to implement RMB cross-border settlement pilotfrom2009, and gradually to promote it all over the country. RMB cross-bordersettlement is not only benefits the whole country’s politic and economy, but alsobenefits our enterprises and banks. From the view of China’s commercial banks, RMBcross-border settlement brings them enormous business opportunity, which relatedthem to cultivate core competitiveness and their international operation.This paper makes the commercial banks as the object, the article first to analyzethe scale, operating mode and existing problems of the RMB cross-border settlementbusiness. Concludes that the development of this business experienced a process frombeing slighted to booming, its development space is huge in the future; banks handlethe business depends on the clearing bank pattern and agent pattern. Existingproblems in the bank are no global settlement network, lack of linkage betweendomestic and foreign institutions, fewer product categories and the risk managementability is insufficient.This paper focuses on to analyze the business’s operational risk, especially theoperational risk management processes. Author designed a risk warning index system;think the income model should be used by banks to measure risk under manyconditions now; but also appeal to the banks to establish the risk loss database as soonas possible in order to use more efficient and accurate measurement model.Commercial banks should set up a regulator. Pay more attention to the risk prevention,rational use the outsourcing and insurance to transfer risk. Develop kinds of business products and control the credit for a single customer to spread risk. For the risk whichcan not be completely avoided and its frequency is high but loss is small, bank can usethe accrued reserves to compensate the damage. For the risk which can not be insured,bank can consider set up a fund to deal with. Do a good job of reporting and feedbackto ensure the management work is effective.Our commercial banks should actively absorb the operational risk managementexperience from advanced international banks. To improve the operational riskmanagement ability, banks can create a good risk culture, improve risk prevention andcontrol awareness of all staff; perfect rules and regulations, establish an effective riskorganization structure.; improve operational risk management technology, rational usethe management tools; optimize system function, emphasis on talents teamconstruction; and improve business operation. This article also mentions how tofurther expand the cross-border RMB settlement business for the banks. Points outbanks must perfect the payment and settlement system, vigorously develop theclearing channels; vigorously promote the business,deep tap domestic and foreigncustomer’s demand and enhance innovation of products; strengthen the interactionrelationship between superior and subordinate, domestic and foreign institutions, andthe relationship with government regulators; enhance business personnel’s operationallevel and all staff’s professional ethics level, improve risk management ability ofbank.