A Study About The Internal Control Of The Listed State-owned Commercial Banks In China

In order to achieve the management goals, commercial banks prevent risks in advance, control risks in process and evaluate risks by formulating and implementing a series of regulations and procedures. This dynamic process is called internal control of commercial banks. Facing increased risks of commercial banks, our government strengthens the demands of the construction of internal control in commercial banks, especially in the listed state-owned commercial banks. Internal control has become a basic guarantee for long-term stable operation and sustainable development of commercial banks in China. In recent years, the listed state-owned commercial banks put a lot of energy in the construction of internal control and get some results. But, the study of internal control of commercial banks in China is still quite inadequate because the start is later than other countries. Compared with the world advanced banks, there are still considerable gaps. Improving internal control is a difficult and long-term task for the listed state-owned commercial banks who want to be important members in international banking community.Strengthen the construction of internal control should start from finding out the shortcomings and defects. According to the actual situation, we can find out the following main problems in the internal control system of the listed state-owned commercial banks in China. (1)Both internal control environment and risk awareness in employees are weak. (2)The technology and means of risk assessment is out-of-date and the coverage of risk assessment is narrow. (3)Internal control system is difficult to adapt to the needs of business development. (4) Information transfer is inefficient for lacking of effective communication channels. (5)The internal audit fails to give full play and can not adapt to the needs of regulatory activities.If the listed state-owned commercial banks want to establish a sound internal control, they must find out and settle the following deeper reasons for shortcomings. (1)The boundaries of responsibility of "three board and management" are fuzzy. Corporate Governance Structure is imperfect because property right structure is irrational. Complex company organizational-structure leads to progressively weakening of binding. The existence of a variety of values affects the formation of healthy corporate culture. Human resource policy is not conducive to the development of banks. (2)There are difficulties in quantifying risk because risk assessment is at the initial stage and lack of professionals. (3)The idea of control activities outdated. The supervision and management of authorization is poor because the power of branches is too concentrated and supervision lack effective means. Construction of internal control can not keep up the development of the new business.(4)Middle-level organizational system within banks are too big and complex, coupled with the lack of clear reporting system, making information transfer deficiencies.(5)There exits many shortcomings because the internal control evaluation system is still in its infancy and lack a uniform set of standards. The obsolete technology of internal auditing and the poor quality of the audit staff makes the internal audit could not play a positive role.The listed state-owned commercial banks should improve the construction of their internal control from the following aspects:(1) They should Clarify the borders of responsibilities of shareholders, board of directors, board of supervisors and senior management. Establish the Investor system and accountability system. They should develop and implement sustainable human resources policies and top-down corporate culture. (2)They should promote economic capital management. Implement effective method to accurate measure risk, and clarify the risk tolerance. (3)They should change the idea from the hierarchy management to centralized management and from risk control to risk management. Strengthen the position division restricting and make division of responsibilities and credit authorization mechanism clear, to keep internal control building up with the development of new business and new technologies. (4) They should build a clear reporting system and make full use of information technology platform to improve information transmission efficiency. (5) They should improve internal auditing techniques, enhance the quality of internal audit staff, improve internal control evaluation system further, promote internal control self-assessment, and strengthen the external monitoring of internal control.Only on the basis of fully understanding, identifying their own defects and taking corresponding measures, can the listed state-owned commercial banks achieve the purpose of improving ability to withstand risks and enhancing market competitiveness, and can also be able to achieve the ultimate goal of leading international commercial banks.