Research On The Mechanism To Prevent From The Risk In Commercial Banking

Finance is the core of economy in the modern times. The reform of financial institutions is the key step to set up socialist market economy in China. Financial risks are companied with financial activities. Therefore, there is risk to a great degree while finance pushes the economic movement.The financial development and the reform of financial institutions of China have got great achievement which attracts the whole world. For example, the number of commercial banks inside the country has increased quickly and the operations of all kinds have acquired quiet great progress. The establishment of social market economy has provided enormous space and opportunity for the financial development while making it face financial hazards that have never existed before. For a long time, the problem of inside control in commercial banks has puzzled China and the world. The occurring frequency of financial cases indicates that commercial banks in China have low ability to control the risks. With the globalization of world economy, the financial operations in China are inevitably confronted with serious competition and baptism in the national and international financial markets. Therefore, the construct of inside management system appears to be important and imminent.The financial liberalization and globalization and innovation have made the financial organs face the complicated risk environment since the 1970s. Especially in China, market economy system is imperfect. There are many factors to threat bank security and many bad assets and many questions exposing in the reform process. There have often happened bank operation risks in recent years. All these factors above immediately affect the stability of entire financial system and economic order. Therefore, the risk management has a vital significance to further deepen the reform of Chinese banking industry.After joining WTO, the financial industry will face directly the market and the financial organs must be faced with the exterior challenge and impact. It is an urgent affair for the Chinese financial reform to set up the crisis consciousness and promote the ability to keep away the risks. In the future, the competition between the banks will concentrate on the risk management ability which will become the core of the bank competitive power. How to adapt the external environment of finance and supervision, construct the comprehensive and effective risk management system, implement effective management to all kinds of risks, such as credit risk, market risk and operation risk, and continue to promote and maintain the advanced ability to manage the risks is the cornerstone to construct the bank lasting competitive advantage and safeguard the bank sustainable development.