The Case Analysis Of Agricultural Bank Of China's Bill Rediscount Business Risk

Since the reform and opening up,China's commercial banks continue updating the financial products and broadening the scope of banking business.As the combination of credit business and capital business,bills rediscount business has the characteristics of strong liquidity,short duration and high efficiency,which has played a positive role in meeting the short-term financing needs of commercial banks,adjusting the structure of assets and liabilities,and enhancing their profitability.A lot of bill intermediaries are emerged in the bill market.Cooperating with these intermediaries,not only do commercial banks can adjust the scale of credit quickly and increase the balance of deposits,but also can increase the bank's middle income.However,the risk of bills rediscount business is also revealed gradually with the bank's own limitations,and the lack of self-discipline and strict regulation of the transaction.In recent years,bill cases continue occurring in the bill market.Especially since 2016,financial institutions in the banking industry have a series of serious bill business cases,which cause very terrible social impact.Therefore,it is imperative to control the risk of bills rediscount business.This paper adopts the way of case analysis,and selects a new bank bill case to study in-depth the risks exposed in the bill discount business,and the reasons as well as effects of risks.Combined with the current situation of bill market and rectification plan,the author puts forward more perfect control countermeasures to the Agricultural Bank of China,and summarizes the revelation of ABC's case on China's commercial banks in the future to prevent the transfer of bills.The analysis found that the outbreak of the ABC bills case involved operational risk and compliance risk.The reasons include bill market factors,internal factors of B branch in the Agricultural Bank of China and the intermediary factors.Bill market factors include the expansion of bills discount business,decreased discounted interest rates and increased Intermediary participation led by bill innovation.The internal factors of B branch in the Agricultural Bank of China are the root causes of the incident,including the lack of the risk check mechanism,the loopholes in the notes trading process,the complex employee relations,the poor internal control mechanism and the ignore the regulation.The factor of bill intermediary is the direct cause of the incident.It mainly manifests that the access threshold of the intermediary is fuzzy,the supervision is not in place and the industry self-discipline is lacking.The case has also produced a wide range of effects.One of them is that the funds and credibility in the B branch are damaged,so that the business of buy and sell declines,the second influence is the negative growth of the Agricultural Bank operating income and the third is that the discount market interest rates continues rising.Also,the ticket discount business is affected,so that electronic bills develop rapidly.Therefore,this paper puts forward a more comprehensive risk control strategy to improve the remedial measures proposed by ABC when the case happened.The risk control strategy includes the establishment of a sound pre-risk prevention mechanism to carry out internal self-examination on a regular basis,the improvement of the transaction process of bills,the rectification of risk control strategy in ABC,and the strict implementation of internal control system.In addition,we can come to the following inspiration from the risk events of ABC.When commercial banks conduct the bills transferred business,they had better to review strictly the bills and regulate the use of off-site account to avoid bill intermediary transferring funds illegally.At the same time,they need to strengthen staff's awareness of compliance risk.The evaluation should be linked with the performance.Also,commercial banks must involved strictly in the affairs which bill intermediaries are participate in,and supervise the whereabouts of funds.Carrying out the innovation of the bill,they should be as prudent as possible.This will provide a new way for China's commercial banks to carry out the business of negotiating bills in the future.Also,it will help push the bank bills business into a benign development track.