Research On Operational Risk Management System Of AB Bank Jiangxi Branch

Operational risk is one of the oldest risk categories.It appeared when the banking industry started.However,people didn't pay much attention to it until more and more operating risk events continued to occur.In the year of 2004,with the introduction of "New Basel Capital Accord",operational risk is officially considered one of the three risks along with credit risk and market risk.Banking as a high risk and high profit industry,whether commercial banks can survive and obtain a good development,depending on whether they have effective management and prevention to the various risks that may arise.Market risk and credit risk have drawn a lot of attention in the commercial bank risk management system long ago.The measures for managing and preventing those risks are very mature.However,the solution for controlling operational risk is not comprehensive.Although operational risk is accompanied by the birth of the banking industry,in the earlier period,the banking business process is relatively simple,the financial products were not as diversified as nowadays,operational risk is not significantly exposed,but hidden in the market risk and after credit risk.Therefore,commercial banks tend to focus on the management and prevention and control of market risk and credit risk,and did not attract enough attention to operational risk.In recent years,operational risk events has frequently occured in China's banking industry.such as: Pine Street branch of Bank of China Heilongjiang River "Alpine case" missing deposits in 2005,China Construction Bank Jilin Branch of 320 million yuan deposit evaporated in 2005,Construction Bank branch teller plain theft large bank funds in 2006,Handan Agricultural Bank vault theft in 2007,etc.These risk events not only has brought about significant economic losses to the banking sector,but also result in negative impact in the China's banking industry.Moreover,it has exposed significant deficiencies and various problems of internal risk control management in China's commercial banks.Therefore,improving operational risk management,establishing proper risk measurement model and operational risk management system for China's banking industry has become an important issue to be solved in China's commercial banks.Since the end of last century,some internationally active banks have started working to build and improve operational risk management framework in order to reduce the negative impact that major events brought and enhance their market competitiveness.has made considerable progress.Basel Committee released "New Basel Capital Accord" in June 2004.Operational risk has been officially brought into the regulatory framework of the banking supervision department.In 2005,the China Banking Regulatory Commission(CBRC)issued "on the method to increase the intensity of Operational Risk," which officially opened the prelude of strengthening the supervision of operational risk in domestic commercial banks.AB Bank is one of the four major state-owned banks in China.It's operational risk management system has established for a long time.The basic system construction is compled with the "Basel Capital Accord",and all the regulatories from COSO internal control framework Association and the CBRC.The management system has been modified and integrated for several times,AB Bank is also trying to explore the new development which can be fully adapted to the Bank's management.The existing management system can fuctionally gather statistics of operational risk events and make recommendations to prevent it when operational risk events are not frequently occured.However,the type of operational risk events varied in recent years,the frequency of its occurence has intensified,the original operational risk management system is unable to meet actual management demand,it began to expose its shortcomings.Especially in 2015,the whole world was facing a severe economic situation domestically and internationally.Thus,all kinds of operational risk events has occurred frequently.In this case,AB Bank must constantly improve and enrich its internal operational risk management system construction in order to accommodate today's new situation.This essay is taking AB Bank Jiangxi Branch as a study object of operational risk management system.It will fully analyze the bank's operational risk management system by using the knowledge of internal control management,combined with literature research,investigation,comparative study and root cause analysi and other research methods.It will also condudt an empirical study about the causes of all the operational risk loss events that occured in 2015 by examing the key risk indicators.In the end,this essay will make recommendations of improving its opreational risk management system to AB Bank Jiangxi Provincial branch from aspects of system construction,risk warning,evaluation and risk indicators,according to the findings.This will provide AB Bank Jiangxi Branch a strong theoretical and practical meaning in strengthening its operational risk mamagement,reduce the operational risk loss events' occurence and major financial losses in the competitive market.It will also help AB Bank Jiangxi Branch maintain steady development and good reputation.Moreover,the study results of essay will also have guiding significance and reference value in effectively control operational risk for other commercial banks.