The Study On The Personal Finance Of Commercial Banks’ Internal Controls

With the slowdown of the traditional business in commercial banks, personal finance has become its new growing business. From the first personal finance product introduced by China Everbright Bank, personal finance business witness its booming in China. Over short10years of development, the scale of the personal finance in China increased139times, and the numbers of the products started with only a few, has now been over47000. Various types of products gradually found their own ways to avoid those old supervisions. While we are enjoying the benefit of the personal finance business, the risk has unveiled its mask.From the "product transfer" incident in Agriculture Bank of China in Shenzhen, financial product huge loss of Huaxia Bank to the president of a sub-branch in Yantai Bank runaway with clients’ money, personal finance business has drawn the attention of the public. People started to lose faith in personal finance, regulations and the bank themselves begun to pay more attention to the risk management in personal finance.People started to ask for the banks to take responsibilities when there’s loss in their investments, but the banks all avoided the question thus led to further discontent from investors. Investors pointed out several shortcomings and defaults during the marketing process such as lack of risk reminder and defects in employee management, proposed that those shortcomings and defaults are the real reasons of those incidents, In the meantime, they also realized that they over-trusted the financial manager and purchased blindly, they didn’t understand those product fully. Thus, under the old internal control framework of commercial bank, the risk management of personal finance is no longer suitable for current rapidly changing and growing business, change and improvements are needed for the moment. In2004, China Banking Regulatory Commission(here and after CBRC) has issued<The Trial Act of the Judge of the Internal Control in Commercial Bank> to guide the risk management in commercial banks. With the development of personal finance, the CBRC issued several regulatory documents such as<The Note on Further Standardize the Investment Management of Personal Finance in Commercial Bank by CBRC>,<The Note on Further Standardize the Bank-Trust Corporation of Finance Business by CBRC> to further standardize the personal finance business. However, inside the bank themselves, they still continued to apply their whole internal control framework and neglect the growing risks in personal finance. They made no adjustment or improvement toward risk prevention and thus left many loopholes in risk management.This essay is based on the principle of combining theory and reality. It takes the real condition of the internal control in personal finance business in XJ sub-branch of the G bank, apply case analyzing and compare and contrast methods, fully unveils the major risks that personal finance business face. The essay is based on the theory of COSO internal control framework, analyzes the five factors of personal finance in XJ sub-branch including control environment, risk assessment, control activities, information and communication and monitoring. The essay combines real work experience, analyze and assess the current internal control work, reveals its flaws and proposes solutions and measures.Through the study of the internal control of personal finance business in XJ sub-branch of the G Bank, the essay reveals the problems the current internal control in commercial banks, and wishing to offer reference and shed some light on standardizing the development of personal finance and improving the internal control of personal finance business in commercial banks.