Comparative Study On Operational Risk Of Domestic And Foreign Commercial Banks

In recent years financial activities have been more and more complex and the risks that financial institutions face have also been constantly changing because of the deregulation and globalization of finance, of the increasing financial products and of the updating financial technology. Nowadays it is not rare to see that the banking has suffered substantive economic loss and the loss of bank image and reputation by lack of system or ineffective inner control and by external and internal fraud. It is widely accepted that operational risk, only second to credit risk, has been one of the main factors causing loss to banks. The international financial sector and supervision organization have been exploring and constructing the technology, techniques and framework of the management of operational risk and have made outstanding improvement but comparatively speaking, the study and practice of operational risk management in China have fallen far behind.At present Chinese researchers pay much attention to the introduction of operational risk and the study of measuring model rather than the comprehensive comparative study of operational risk between China and the Western countries, which is unsuitable to such a condition under which Chinese banking is to be brought in line with the international practice. So the author of the thesis believes that it is instructive and of great importance to find the gap and distinction between Chinese banking and the Western banking and explore the development orientation by conducting a comparative study of operational risk between China and the Western countries from the aspects of defining, measuring, loss characteristics, internal and external management of operational risk.Starting from the comparison of the definitions of operational risk, this thesis conducts a contrastive study between the operational risk of domestic and overseas banking from the aspects mentioned above by way of demonstrative and comparative analysis. And this paper also proposes a tentative plan for the management of operational risk of Chinese banking.The first chapter of the thesis is an introduction consisting of the expatiation on the background and significance of the research, literature review and the framework of the paper. Chapter 2 is about the comparison of the definition of operational risk made by Chinese banking and the Western banking by expatiating on some international authoritative definitions of operational risk. Chapter 3 compares the various measuring models of operational risk which is the premise to configuration of economic capital to operational risk. This chapter introduces Basel II's three measuring modes and sums up and compares the present employment of them by foreign and domestic banking. Chapter 4 compares the loss characteristics of operational risk by inducing cause of formation and characteristics of loss data and makes a contrast of line of operation and risk types by demonstrative analysis. Chapter 5 is about the comparison of operational risk management. This chapter firstly introduces the four stages of the development of commercial bank's operational risk management and makes a contrastive study of operational risk management from the aspects of management culture, framework, basic managerial function and means and information release through the introduction of the management practice of operational risk of British, American and German commercial banks and the summary of Chinese banks' management of operational risk. Chapter 6 is about the comparison of supervision of operational risk. This chapter firstly illustrates the requirement and practice of foreign banks' operational risk and then introduces the present status of supervision of operational risk in China and finally concludes the gap between foreign and Chinese banking in terms of system, modes and strength. Chapter 7 is the conclusion of the research and proposes a tentative plan for the management of operational risk of Chinese banking from the aspects of organizational framework, views on capital configuration, total risk management and quantitative management.