Reseach On Operational Risk Management Of Commercial Banks

Operational risk is a risk category old and young, at the beginningof the rise of the banking industry already exists. With operational risk eventscontinue to occur until it has been more attention, especially with theintroduction of "The New Basel Capital Accord", the operational risk isconsidered an official three risk and credit risk, market risk of side by sideOne. Due to operational risk for the late start of theoretical studies, operationalrisk management is relatively weak. In recent years, some domesticcommercial banks’ internal major cases to the state both frequent causeirreparable huge economic losses, but also seriously affect the businessreputation and social image of the domestic part of the majority of commercialbanks, but also expose our commercial Bank of major defects and variousproblems in the internal operational risk control management. In recent years,commercial banks operational risk cases occurred frequently to Chinesebanking regulators and major banks’ internal risk management departmentsounded the alarm. However, operational risk is the risk of every commercialbank in its management activities in the process must be undertaken. Targetcommercial bank operational risk management is to control how reasonablywide range of operating risks, and how to effectively and efficiently preventmajor operational risks within the bank and huge loss events. Under thecurrent circumstances, Chinese commercial banks operating in the internalrisk management due to its late start, lagging behind compared to the foreignconstraints and problems are more of these factors and the main problemsinclude: Chinese commercial banks operational risk external constraints andmanagement problems are mainly financial regulators limited the effectiveness of the regulatory commercial banks obviously inadequatesupervision; commercial bank’s internal financial product pricing mechanismserious deficiencies; commercial banks’ internal credit rating systemobviously still inadequate and perfect. Commercial banks’ internal operationalconstraints regarding the risks mainly include: commercial bank’s internalcorporate governance structure is not perfect, specifically in the Bank’s Boardof Directors and the Board of Supervisors is not perfect and perfect function,first of all, the independence of the board of directors is not strong. In addition,the Supervisory Board Most of the work of a mere formality; for the apparentlack of supervision of the client’s motivation; commercial banks’ internalincentive and restraint mechanisms still not perfect. Commercial banks’internal risk management philosophy more traditional and backward, but thetheory is not enough, and complete systems. Databases and commercial bank’sinternal IT system construction is lagging behind, the New Capital Accordsenior law requires detailed, in-depth and complete internal and externaldatabase as a support and foundation. Plus many professional talents domesticcommercial banks’ internal risk management is still relatively scarce.This article is in this context, as a specific example to Merchants Bank, amore detailed analysis of the current status of the commercial banks’operational risk management, as well as the reasons for the formation of themain problems, these problems include: operational risk managementphilosophy errors, heavy cases investigation, and light comprehensive analysis;weight management afterwards, and obviously light in prevention; re auditaudit, and light overall management; heavy internal grassroots operationspersonnel management, and light management for senior leadership.Operational risk management over a single, over-reliance on the bank’sinternal audit, external audit and obviously overlooked a powerful force;advanced electronic means and the relative lack of tools; risk managementsystem can not keep up, and weak enforcement system. Specific operational risk management structure is not perfect and perfect, relatively loosemanagement responsibilities, the lack of a dedicated operational riskmanagement department; authoritarian nature of the bank’s internal auditdepartment obviously is not strong; the grassroots branches of banks inoperational risk management functions obviously missing.Then, on the basis of operational risk management from the advancedexperience of international best bank above, combined with "commercialbank’s capital management approach (Trial)" as well as the specificrequirements of Basel Ⅲfor operational risk management of Merchants Bankshould How to establish a scientific, complete and effective specific riskmanagement framework to enhance operational risk culture, improveoperational risk management security system and strengthen supervision, andactively optimize operations Merchants Bank under the current situation ofrisk management external governance environment, and actively establish andcontinuously improve long-term and effective incentive and restraintmechanisms, training professional and technical personnel of operational riskmanagement, Merchants Bank to establish and continuously improve internaloperational risk database as soon as possible and continue to strengthen theconcept of Merchants bank’s internal operational risk management and raiseawareness and personal risk awareness within the bank’s staff and otheraspects of specific practical solutions proposed measures and proposedmeasures, in order to further improve the Merchants expect the bank’s internaloperational risk management to provide some guidance and help. Meanwhile,we hope that the other also to operational risk management of commercialbanks of Chinese to provide useful lessons and positive reference.