The New Institutional Economics Of The State-owned Commercial Banks Operating Risk Analysis

Operational risk has been in existence since commercial banks come into being. Operational risk is one of the oldest commercial bank risk. However, because of the hidden nature and relative smaller loss, Operational risk has been ignored in the theoretical circles and the banking field for a long time. Since the 1980s, due to the financial innovations, banks have to face the new financial environment and the complexity of technology, which makes operational risk emerge more and more obvious. Especially the bankrupts of Balin bank and Daiwa bank for great loss in the 1990s make the international banking pay more attention to operational risk on an unprecedented degree.In 2004 the Basel Committee issued the 'New Basel Capital Accord'.There operational risk is defined as the risk caused by incomplete internal procedures, personnel, iffy systems and external events,including legal risk but excluding strategic risk and reputation risk. The New Basel Capital Accord firstly brings operational risk into framework of risk management, and asks financial institutions to allocate capital for operational risk.A more detailed disclosure is also needed. In our country, awareness and control of bank operational risk are also ignored for a long time. With gradually transition of the economic system from a planned economy to a market economy and the deepen reform on financial system, many problems are exposed on the state-owned commercial banks, and many serious cases occur frequently. Compared with the international banking, Our state-owned commercial banks have its own specificity. Differences emerge both on the expression and the causes. The unreasonable share structure, corporate governance deficiencies, weak implementation of internal control, loss of advanced corporate culture are the system roots of the operational risk incidents.This paper uses the new institutional economics as a guide to analyze the causes and substance of the bank operational risk.In the whole process this paper use the thinking which is so useful for analyzing Chinese economic issues—the thinking of institution. Firstly use property rights theory to analyze the negative external effects which cause the bank operational risk. Secondly use the 'entrust - agent' theory to analyze the 'inner personnel control' phenomenon, and set up model of maximizing the interests of the 'inner personnel control'to analyze the cause of bank operational risk. Thirdly through the analysis using the institutional transitions theory ,it points out that state-owned property rights is the result of a compellent institutional transition. Behindhand culture, such as the administrative colorific culture is closely related to the 'state-owned'. Because of the strong 'path dependence' and the slow pace of transiting, the bank culture changing did not keep pace with compellent institutional trashing, which made the Behindhand culture still 'play a role' and caused a lot of operational risk incidents. Actually operatonal risk of the state-owned commercial banks is essentially needless trade cost. Finally, on case studies, the paper analyzes internal control failure of the bank.According to the analysis this paper puts forward countermeasures from the institutional arrangements and the institutional environment two sides: optimize the governance structure; strengthen supervision and inspection ; strengthen the independence and authority of audit departments ; Create a good law environment and build advanced company culture.