The Analysis About The Risk Management Performance Of Commercial Banks In Comprehensive Risk Management Framework

In recent years, with the development of technology, the globalization of trade and liberalization of financial markets, the financial industry has entered into a fast-extended time. Due to the huge affect of economic fluctuations, and deep affection from the changing market and risky credit environment, it has become a significant point for commercial banks to handle these kinds of risk so as to better the operating results. Especially, the introduction of Basel Accord II has made the risk management of commercial banks become more important than ever. There are two goals for commercial bank to manage risk. Firstly, as a special enterprise, commercial bank manager should considerate the possibility of continued operation through the process of risk management. Secondly, as a important part of the financial market, it is a duty for commercial bank to contribute to the increase of GDP. Therefore on the purpose of managing risk and contributing to the GDP, there is a necessity for commercial banks to instruct a reasonable risk management system. However, commercial banks faced kinds of risk like market risk, operational risk, credit risk, liquidity risk etc, which might complicate the risk management in commercial banks. Single mode of risk management is not enough for them to meet the requirement from managers. Therefore, a comprehensive risk management mode need to be applied to ensure the continued operation of commercial banks.In reference to the three pillars theory and the Basel regulatory system, China's Banking Regulatory Commission issued the Commercial Bank's Capital Management look forward to establish a comprehensive risk management framework in Chinese market. There is a set of bank's internal assessment system conducted in this framework, for example, regulatory supervision and external market discipline. However, because of unawareness of risk, the lack of risk management experience and the limited human resource on exploring the risk management, risk management performance is not ideal under the guidance of a comprehensive risk management framework. In this paper, China Merchants Bank will be the case to be studied in order to analyse the risk management process. Although the capital adequacy ratio of China Merchants Bank reached regulatory requirements, many issues have not been solved, such as credit risk due to increased non-performing loan ratio, market risk due to changing interest rate and exchange rate, operation risk due to imperfect internal control mechanism etc. I believe that the bank should first establish a comprehensive risk management philosophy and appropriate corporate culture to improve risk management. Secondly, the bank should to establish more comprehensive regulations and management processes to improve the risk management structure. Thirdly, establishing a sound credit information management system to effectively prevent credit risk. Fourthly, strengthen personnel training and enhance the sense of responsibility of employees to prevent the occurrence of operational risk fundamentally. Moreover, establish a professional risk management team to ensure the risk management philosophy implied effectively. In short, it's a long-term process for banks to improve risk management, and the author need a further more comprehensive study.