Research On The Management Of Operational Risk Of Banks In China

Along with the rapid development of financial derivatives, risk in financial institutions is becoming more important than ever before. Recently years, many financial institutions have suffered internal and external deceptions. Financial crime causes huge lose to banks, it means financial institutes exposed to huge risks, and Basel Committee named this risk as operational risks. This concept has been defined in last century, as financial crime increased dramatically these years, operational risk began to cause great concern. Foreign research institutes and banks pay more attention to operational risk. International organizations like Basel Committee highlights operational risk in financial institutions and introduces monitor provisions. Researching institutes like Federal Reserve and college did more research in operational risk, especially in modeling operational risk. Because of our financial system's structural problem, our banks are still in an embryo stage, however, as globalization and banks are boosting, past risk management could not keep pace with the fast-growing bank. What we need to do is introducing senior risk managerial personnel, adopting advanced risk management method. We have to shake up the whole risk management department in banks. This is a crucial time for our financial institutions, and operational risk play a very important role in it. A tight operational risk control makes banks go further. Finally, it is author's pleasure to see this paper can make some reference to related people.The thesis consists of 5 chapters, and the contents of each are as follows:The first chapter is introduction. This chapter introduces the background of operational risk, the definition of operational risk and the aim of this thesis. After that, this chapter discusses some foreign and domestic related research. Also, it demonstrates the whole structure of this thesis.The second chapter mainly discusses the management of operational risk. Operational risk has seven different types, internal fraud is the most important one, large operational lose are caused by it, many of them are impressive ones. This chapter explains fundamental managerial methods of operational risk, and examples show operational risk management is still in an embryo stage around the world.The third chapter mainly demonstrates the statistical character of loss caused by operational risk in banks. Domestic banks have not build up operational risk data completely, but we still can find some feature in these data, and conclude the reason that causes these operational risk. The forth chapter make empirical analysis for operational risk in domestic banks. In this chapter, international modeling methods are introduced. Using pubic data collected from website, we choose a statistic model to measure operational risk in our banks, Matlab is used to process these data. Although these data is not completed for some reasons, we still reckon this result is meaningful.The fifth chapter comes up with systematic suggestion. This chapter lists risk-management of several foreign banks to compare and foster new methods. Measuring operational risk is merely not enough; operational risk should be control by risk-control system. This thesis firstly suggests that banks should build up their operational risk lose database, which is the basement of risk-control. Secondly, we suffer big operational risk at basic level, which should be pay attention to. Thirdly, our banks have to improve the overall risk control ability and a legal system. At last, enhance internal auditing in banks, take substantial steps to improve supervision. We have comparably low risk control ability in our banks because political and system problems, as financial globalization and bank development are speed up, it is urgent to improve our risk-control in banks, adopt new and advanced methods, recruit high-level talent, and keep operational risk at low level.