A Research On The Risks And Supervision Of Internet Banking In China

In recent years, Internet banking has become the aim of the reform and development of traditional banking, which provides clients with quick, convenient, and multiple banking services by means of network technology. Its low-cost and high-profit quality makes many countries consider it the orientation of their banking development in the future. Furthermore, the construction of financial information and popularity of Internet enable Internet banking in China to develop rapidly. In 2008, the volume of trade by Internet up to 320.9 billion, 30.6% increase than that of 2007. Due to its trend of rapid development, Internet banking functions as a new interest improvement to Chinese banks, and more and more banks regard Internet banking as a strategic height in banking competition.In addition, the innovation of technology brings great profits to banking; however, it also makes banking confront various risks. The Internet banking in China not only faces the traditional risks including credit risk, liquidity risk, market risk and foreign exchange risk, but it also faces risks result from its specialty, such as strategic risk, operational risk, reputational risk, and legal risk. These risks interfere with the banking operation and make enormous challenge to our existing supervision system. Hence, we must take advanced study into precautions against the risks for Internet banking, set-up supervision system suitable for sustainable development, and ensure healthy growth of Internet banking.In light of the contents mentioned above, the purpose of this paper is to accomplish the research on the risk and supervision of Internet banking with the methods of qualitative analysis and quantitative analysis. It begins with the basic conception of Internet banking, analyzes the causes, attributes, and organizational forms of Internet banking, and summarizes all kinds of risks that Internet banking faces with, including the traditional risks and the one that based on its specialty, such as strategic risk, operational risk, reputational risk, and legal risk. After that, the SOMEI model, S(Subject)—O(Objective)—M(Means and Methods)—E(Environment)—I(Information structure), is put forward. This model is made up of five elements: supervision subjects, supervision objects, supervision means and methods, the environment that may have effects on the supervision institutions, and information structure of supervision institutions. Employing SOMEI model, this paper makes deep researches on our Internet banking supervision institutions, on the basis of its development in our country. Through the research, the main problems existing in our Internet banking supervision institutions at present are tracked down. Last but not the least, this paper also focuses on the discussion of strategies to improve the supervision institutions of Internet banking in our country, based on the analysis of international mature supervision bodies.