The Empirical Study On Operation Risk Of Commercial Bank In China

Operational risk is a kind of endogenous risk exist in bank business activities since bank emerged, but with long-term it has not been included in the bank’s risk management system of risk in the form of an independent existence. Since the1990s, with the gradual evolution of finance,banking are increasing scale and the business is becoming more complex, so the hazards of operating risks become more apparent. Operational risk cases brought about a significant loss of funds and credibility crisis,it let people realize the importance of effective supervision of operational risk. In this context, the Basel Committee on Banking Supervision in June2004issued the New Basel Capital. The New Accord was the first to propose method of calculating operational risk capital and the use of the most state-of-the-art risk control technology management. Then banks began to improve operational risk management and control measure, such as the implementation of strong internal control system, establishment of an independent, development of the bank unified the operating risk the strategic plan; establishment of internal loss database. A series of initiatives on the international research let the supervision of operational risk developed rapidly.In contrast the domestic commercial banks in the operational risk management research started relatively late, even now, we have not established effective operational risk measurement model and sufficient operational risk loss database. The domestic scholars at the present do more in the introduction of the new Basel operational risk management framework, and have not developed own model based on the actual situation of China operating risk measurement.This stage of China’s commercial banks are in a transition period, a lot necessary mechanisms are leak filled. Coupled with the society as a whole is in economic development during the transition period, many Financial institutions in order to grab market and quality customers, continue to meet customer’s unreasonable requirements, so related rules and regulations binding greatly weakened.In complex social environment a small number of people using a variety of means to corrode Bank staff or became common perpetrators. Because of incomplete reporting system, operational risk cannot be timely detected and suppressed. In addition, with the gradual deepening of the database project, the loopholes in the system design of the new business bring potential operation risk. In short, the staff moral issues and inaccurate information disclosure,technology lag, all the vulnerability of the operation of the electronic system construction and system process management implementation mismanagement have led to operational risk become the biggest hidden threat to China’s banks. In addition, in the management of operational risk quantification obstacles, the first problem is the weak operational risk management awareness, banks have no experience to establish the internal database accumulated losses document to manage the operational risk. Secondly, because of the opaque traditional property ownership in China’s commercial banks and information disclosure, internal data collection is a considerable challenge. Adequate internal data is necessary for advanced precisely operational risk regression model or measurement methods in accordance with the provisions of the New Agreement, the lack of data means the most old-fashioned, original way, however the result is not accurate and cannot be used for corresponding provision of the economic capital. Again, due to China’s commercial bank’s governor responsibility system, the audit department cannot contend with the decision-making departments, in other words, the Governor responsibility system allots too many rights to internal senior.The audit department cannot be independent to review the whole bank business and risk management.In view of the poor measure of operational risk environment and internal data is not sufficient, I can only rely upon the "top-down" model to do exploratory research on domestic operational risk. The revenue model based on the bank’s net profit as the dependent variable, the index stands for credit risk and market risk as variable, the total net profit fluctuations can be measured caused by credit risk and market risk, and cannot be measured part is caused by operational risk. At the beginning, I chose the real GDP growth rate, the Shanghai Composite Index, the statutory deposit reserve ratio and other indicators and ten state-owned commercial banks’quarter financial data from the first quarter of2009to the third quarter of2012. At last, I selected Shanghai Composite Index, the non-performing loan ratio, loan-to-deposit ratio as explanatory variables in the model. The I use the modle to calculate nine commercial banks’ separate share of operational risk and loss. ALL the paper make a reference to banks’ provision for operational risk capital.