Commercial Bank's Intermediate Business Risk And Internal Control

For a long time, our country's commercial banks have been focused on the traditional assets and liabilities business. In the past, the marketization level in banking sector was very low, which lead to the big interest margin and made the commercial banks'high profit sustainable. However, in order to break the monopoly created by the big four state-owned commercial banks, and help build Chinese modern commercial banking system, our country encouraged to bring more social capital into this industry, which resulted in the emerging of more and more municipal commercial bank. As the marketizaion of banking sector moves on, the interest margin has been cut to smaller and smaller. To enhance competitiveness and improve the profitability, Chinese commercial banks started to try different business model one by one, of which intermediate business was the most widespread.The development of the intermediate business in China lagged far behind its western rivals. The guarantee business and agent business had taken the lead among all the intermediate business for a long time, and they normally couldn't bring too much risk to the commercial banks, which resulted in a misunderstanding that all the intermediate business would be little risky or none, and the management not paying enough attention to the internal control over the risk. However, the intermediate business has been more and more diversified, and the risk will be accumulated. Once some accidents happen, the banks will be in danger. Therefore, to reinforce the internal control over the risk of the intermediate business will be of great significance.Beginning with the features of the intermediate business, this paper came up with the related theories of commercial banks'internal control over the intermediate business risks by the method of literature study, and it was concluded that the intermediate business internal control should be one part of the general internal control, which should function with other parts, however, it should be differentiated because of its own uniqueness. Then it was deeply analyzed the current situation of Chinese commercial banks' internal control by the method of interviewing and summarizing. The paper was aimed to use foreign commercial banks' experience for reference to help build Chinese intermediate business internal control system, but the internal control system is one of corporate competitiveness and private, which lead to few access to this kind of information. There was no choice but to turn to official guidance for the internal control of many international financial regulators by the method of case study. This paper was written based on the background of COSO and Basel framework been applied at the same time, which could make the conclusion more comprehensive and could be a innovative point. At last, based on COSO and Basel Committee's guidance to financial institutes and foreign commercial banks' advanced experiences, this paper tried to build an internal control system over the intermediate business risks for Chinese commercial banks,and takes external gurantee business and commitment business for specific internal control analysis.