A Study On China’s Banking Industry For Its Risk Evaluation And Risk Transmission Mechanism

With the rapid development of the global financial economy, as transnational business gradually deepened, and the continuing evolution of financial instruments also their derivatives of financial innovation need higher standard for the financial supervision of China to set. The financial sector as the main position of anti-money laundering work, its status gradually highlighted.International anti-money laundering authoritative organization FATF 2012 issued new "40+9" for each country and area to put forward new requirements in anti-money laundering work, then most countries and regions financial regulatory authorities started to change in regulatory target and regulatory framework. Banking industry as the core battlefield of the anti-money laundering work, it is convenient and efficient ways of capital controlling and moving are used widely by criminals. Banking products and services’promotion and application also make illegal money cleaning more variable. After the financial crisis in 2007, in the financial industry regulatory, Risk-oriented has gradually become the new framework of banking risk prevention and regulation.In this paper, I based on the risk supervision theory and methodology as the breakthrough point to explore the risk of money laundering of banking industry and its mechanism.First, I analyzed banking sectors’money laundering skills and methods and the mechanism of typical three stages of money laundering in Banks. Second, with reference to FATF’s standard of risk classification and risk assessment model building up three types bank money laundering risk assessment indicators:the region, product, compliance management.Then divided these three indicators into four levels with total 39 specific classification indexes by using the analytic hierarchy process to quantify the bank overall risk of money laundering.Then, according to the quantitative bank risk score to set up two risk conduction model to analysis banking risk transmission mechanism and the research is divided into two parts:One part is to use dynamic model to analysis of risk in closed bank internally contagious, so that we can explore the relationship between different periods, supervision cost and scale of black money. Through this method, we can illustrate how money laundering risk effect and the influence the next period money laundering risk.The other part is use revised Frakes’(2000) model to discuss the risk contagion between banks, that Introduced the size of the bank risk resilience at all levels, then explain the strong ability to resist risk of bank 1, bank 2 and other third parties "free-rider" bank that lead to money laundering risk rapidly spread in the banking system. Finally, put suggestions about how to prevent and strike money laundering risk in banking industry in China.