The Improvement Research Of Financial Risk Management Of China Commercial Banking

With the development of China financial industry, the banking industry, as the core of the financial industry, also has developed fast. And development will bring opportunities and challenges. One of the important challenges is the management of risks. The commercial banks at this stage put more emphasis on preventing its decision risks, market risks and operating risks. However they often neglect the prevention of financial risks, which will harm the assets quality and operation result of the banks. In order to survive and develop, the commercial banks must control the risk. Therefore the study on risk management is of some practical significance. The purpose of this paper is to find problems in the risk management process of commercial banks in China, and to give some suggestions according to our national conditions, so as to give some reference to improve the level of risk management of banking industry.The first part of this paper: I expounded the background, research significance, the structure, innovations and shortages of this paper.The second part consists of the related materials of commercial banks and the analysis of the research results of risks management at home and abroad.After generally analyzing the related theories of banking risks, on the theory basis The third part firstly defined the risk means the loss possibility of prospective earnings or paying ability decrease because of irrational financial structure, capital price change and other reasons. Then I again defined the meaning of banking risk was formed in the process of capital movement. It was also called capital movement risks. Banking risks existed all the parts of financial movement process. Banking risks have their own features. First, the risk is changeable, which means banking financial risks condition and level are changing all the time. The changing consists of bank customer operating risks changing, the construction risk changing of investment project by loan, and the loan project changing by natural factors. Second, the risk owns universality. Because the development of banking business relies on credit which itself is full of risk. And the credit relationship subjects are complex. Third, the risk has dispensability because the bank is the body to create credit. The amplification function increases the risk, and modern market economy has formed the society-level credit system, of which each system has close relation with others. Fourth, the risk owns concealment. Because when the credit risk is hidden, it is difficult for us to find the potential risks.Through comparing and analyzing, this paper divides the banking industry risks into five major types:the liquidity risk, interest risk, operating risk, intermediate business risk and non-performing loan recovery risks. Liquidity risk means that commercial banks do not have sufficient funds to meet payment needs, which thus leads into the loss of repaying ability. The liquidity research and development has gone through three stages:the liquidity of assets, debts liquidity, asset and liabilities liquidity. Banks need to maintain their proper liquidity, because sufficient liquidity can ensure creditors'right can paid on time. And banks will have sufficient capital to meet customers'demand of loans. Banks can also appropriately expand or contract their assets scale according the changes of market conditions in order to achieve the profit purpose. Interest rate risk is the risk of bank earnings due to changes in interest rates declining. Changes in interest rates are influenced by the factors including central bank's monetary policy, macroeconomic environment and the price level. And changes in interest rates can in turn affect the smooth running of the economy. Operating risks mean the risks of loss by the external factors including mistakes and technology defects. It is very important in banking operation and management. And we must pay enough attention to it. The intermediate business risk means the risk in the process that the bank, as the agent of customers, requires some poundage by dealing with all kinds of financial service. It is particularly important in the rapid development of intermediate business. And we must enhance management and choose reliable business. The non-performing loan recovery risk is a kind of risk given more attention by all countries in recent years, especially after the financial crisis. The asset foam problem has aroused the attention all over the world. Then I further summarized the management procedure of risks from risks prevention, risks distribution, and risks control and risks compensation. Also I made it clear that the stages we need to pay more attention in the process of risks management.The fourth part, on the basis of the risk management current situation of banks in China, I made some overall and specific analysis on the problems in the management. Generally speaking, our capital supervision starts late, but progresses quickly. Although there are still some problems, there is still great progress in the system and the mode. But we also have a clear understanding of problems in banking risk management: The first one is the decreased liquidity of bank assets, extremely high ratio debt and the poor liquidity of assets. The second is risk aroused by interest rate volatility. Our specific national conditions determined that changes in interest rates are directly decided by the state control. And changes in interest rates will directly affect the bank's asset prices. The third is the risks in operation process, mainly in two aspects of personnel and internal processes. The fourth is the financial risks in intermediary business, embodied in the settling accounts class, bank cards class, proxy classes, information consultation, and assessment class and so on. The fifth is the risk of non-performing loans, which will deteriorate the risks of commercial banks because of not calling in on time.On the basis of the national conditions in our country, I analyzed the causes of risks in banks. The first is the high proportion of debt operation, which leads to the shortage of liquidity. Low capital adequacy ratio is very common in the banks in our country. The banks are blindly pursuing the economic efficiency without taking the operation condition of the market into consideration. In order to expand the market size, they will take deposits and loans which will result in the increase of operation risks. The second one is the lagging construction of the accounting internal control system. Measures of accounting risks control are not systematic, coupled with the continuous development of the market and business innovation. The construction of control system is seriously lagging behind the actual needs. Third, the financial information management system is still imperfect. Fourth, the risk consciousness is not enough. We are lack of the awareness of the importance of financial risks.In the fifth part, I put forward several suggestions to improve the risk management in our banks. The first is to enhance the liquidity management and prevent liquidity risks. The second one is to increase capital in cash and raise the rate of capital sufficiency. The third is to establish the internal control system and perfect the accounting internal control in the banks. The fourth is to establish the early warning system of financial risks to meet the security needs. The fifth is to improve the quality of staffs and establish the dodging concept of financial risks. The sixth is to enhance the control on the off balance sheet activities and establish complete information disclose system.And the last one is to enhance the procedure management of loans, and establish all procedure management system.