Research On Building Comprehensive Risk Management System Of The Rural Small And Medium Financial Institution

Rural small and medium sized financial institutions such as rural commercial banks, rural cooperative banks, rural credit cooperatives and village banks are the products of China’s bank system transformation. For over50years, the rural small and medium sized financial institutions have gained a huge progress which makes them become an important part of our state’s financial system. And also these financial institutions have played a positive role to China’s economic growth and financial system reform. With the diversity, complicacy, interrace of business types, the bank are no longer faced with a single risk, but a enterprise-wide risk management including credit risks, market risks, operating risks and so on. All these risks are intertwined and has a strong correlation between each other. Under the traditional risk management mode, the bank’s risk management department always takes a separate risk management approach, which definitely neglect the interaction between risks. Therefore, the simplification of risk addition could lead to an overestimate that lead to the waste of manpower and material, let alone an effective distribution of resources.Thus, from the angle of risk management needs, the risk management department of rural small and medium sized financial institutions should fully consider the correlation of all kinds of risks in order to obtain an enterprise-wide risk management. There is no denying that enterprise-wide risk management is the inexorable trend of the future bank risk management mode.The ultimate goal of this paper is exploring how a rural small and medium sized financial institution builds its enterprise-wide risk management system according to the risk management mechanism construction guidelines of rural small and medium sized financial institutions. First, this paper explains the contents of the enterprise-wide risk management system and how the Basel Ⅲ affects the risk management of the banking system. Based on the risk management mechanism construction guidelines of rural small and medium sized financial institutions and the implementation scheme of the risk management mechanism construction guidelines of rural small and medium sized financial institutions which are promulgated by the CBRC, the paper analyzes the financial supervision and regulation department’s requirements for the enterprise-wide risk management system construction of the rural small and medium sized financial institutions, and expounds the necessity and significance of the enterprise-wide risk management for the rural small and medium sized financial institutions. Second, the paper takes Yuyao Rural Cooperative Bank as an example, which is a rural small and medium sized financial institution located in eastern developed regions of China, elaborates the bank’s feature and current situation of risk management from the aspects of credit risks, operating risks, market risks and liquidity risks. It also finds out the gap between the bank’s risk management and the requirements of the risk management mechanism construction guidelines of rural small and medium sized financial institutions. Third, it gives a detailed explanation of Yuyao Rural Cooperative Bank’s specific structure of its enterprise-wide risk management system, designs the approaches, contents and procedures of the enterprise-wide risk management system structure, and also refers to the potential difficulties and the safeguards during the structure. Fourth, this article pointes out a framework of enterprise-wide risk management information system, that is "four working platforms and six subsystems". The four working platforms are risk manager working platform, compliance management working platform, process management working platform and risk tolerance working platform. The six subsystems are credit risks management system, market risks management system, operating risks management system, liquidity risks management system, reputation risks management system and other risks management system.This paper discusses the enterprise-wide risk management system structure of Yuyao Rural Cooperative Bank and is aimed at improving risk management. It also hopes the research findings could encourage the rural small and medium sized financial institutions to carry out the risk management mechanism construction guidelines of rural small and medium sized financial institutions more efficiently, and be helpful to promote the risk management of the rural small and medium sized financial institutions.