Utility Analysis Of Operational Risks In Commercial Banks

Market risk and operational risk, besides credit risk, have become the focus of banks with international business since the Asia financial crisis of 1997. In June 2004. Basel II witnessed the new age of risk management of commercial banks. In the past decade, benefited from the fast growth of financial market and IT techniques, bankers became more capable to learn and master risks, and the risk management mode had changed a lot.The risk management mode has been influenced by operation, management and organization of the bank. Commercial banks from different countries have developed different styles of risk management. Outstanding international commercial banks have been researching the risk management mode, and have set up advanced risk management modes.In the scenario of a more open financial market and state-shares reform of commercial banks in China, the construction of an advanced risk management mode has become the organic requirement and essential protection factor for domestic commercial banks to develop modern corporate management mechanism and key competitiveness. In recent years, domestic commercial banks have learned a lot from international peers to improve risk management modes. Although the improvements are obvious, there is still gap between China banks and advanced international banks regarding risk management mechanism. Therefore, to speed set-up of modern risk management modes turn to be critical across all risk management issues for domestic commercial banks.Currently the relevant researches on risk management are rare due to the late trigger in China, while arguments and discrepancies are many. The practice and exploration proves to be even harder. In 2004. China Construction Bank kicked off the exploration on enterprise risk management mode based on experiences from outstanding international commercial banks. In 2005. CCB launched vertical risk management mechanism reform ahead of all domestic peers, to set up centralized and vertical enterprise risk management. The reform had achieved first-stage target after one year. During the reform, CCB has organized dedicated team to study on the topic and propel the process.The thesis gives a systematic introduction about basic theory and principles of risk management for modern commercial banks, coupled with researches from foreign peers. The fundamental strategies to develop advanced risk management modes have been proposed for domestic commercial banks, based on experiences from first-tier international banks and practical background of domestic banks.Contents:Chapter 1. The outline of risk management theory for commercial banks.This chapter introduces the characteristics and arrangement for risk management system under macro and meso environment, which is the basis for construction of modern risk management modes.Chapter 2. The main characteristics and trend of risk management of modern commercial banks.This chapter reviews the route of risk management of commercial banks, summaries the key features of enterprise risk management, and analyzes the trend of risk management for commercial banks to have a good view of the evolution.Chapter 3. The positive analysis for advanced risk management modes of modern commercial banks.This chapter introduced the risk management models of first-tier international commercial banks with examples from Bank of America, Citibank and Deutsche Bank. The author gives positive analysis on risk management from three perspectives of organization, procedure and operation.Chapter 4. The analysis on current scenario of risk management in domestic commercial banks.This chapter reviews the development of risk management of Chinese commercial banks. According to the analysis on current scenario, the author explains the conditions to set up advanced risk management modes.Chapter 5. The strategic choice to build up advanced risk management modes.This chapter proposes the mission and principles to build up advanced risk management mode. The author explores the strategies and outlook of risk management for domestic commercial banks by setting up risk officer mechanism, executing vertical management and promoting parallel operation between relationship managers and risk managers.