The Research On The Origination And Identification Of Commercial Bank’s Operational Risk

Over recent years, frequent operational risk events have caused huge loss of the commercial banks around the world, and even affect the sound operation of the banking systems in some countries. The operational risk is one of the three main risks which the banks face. Especially the bankrupts of Barings bank for great loss in the 1990s make the international banking pay more attention to operational risk on an unprecedented. The New Basel Capital Accord, which was issued by Basel Committee in June 2004, brings the operational risk into the risk management framework and even requires banks taking operational risk into account when calculating the economic capital. On March,2005, China Banking Regulatory Commission published the Notice of CBRC on Enhancing Operational Risk Control, and required banks to keep away and control operational risk.Firstly, the paper defines what the Operational Risk is and what it includes. Then, give a summary on the qualitative evaluation of the operational risk management process and the quantitative evaluation of the management results.Through study on the theories and concepts of operational risk, this paper analysis the major reasons of the operational risk in abroad commercial banks and in domestic commercial banks, such as Execution, delivery & Process management; Clients, Products & Business; internal and external fraud; employment Practice & workplace safety etc. We do a case study on one of the commercial banks in P branch of Agriculture Bank of China by analyzing its operational risk managements, examining the flaws in the process of commercial bank daily management.According to the reasons that operational risk produce, this paper has Suggestions to control the risk. Strong administration and effective supervision are undoubtedly necessary. However it’s the basic means that the domestic commercial banks have to reinforce internal control. How can the domestic commercial banks reinforce internal control? This paper suggests some approaches:build up sound culture of operational risk management, make clear process to monitor operational risk and so on.