Case study on operational risk management of banks

International cases of operational risk management of commercial banks

Case 1: Bahrain Bank. 1February 1995, the Bank of England, the Bank of England, announced that Bahrain Bank was not allowed to continue trading activities and would apply for asset liquidation. 10 was acquired by ING at the nominal price of 1 0 days later. The total loss of Bahrain Bank was $6,543.8+$0.3 billion; Financial loss100%; The time from invasion to disaster is three years; The illegal content is to hide options, futures trading and losses without authorization; The violator is a trader of a subsidiary in Singapore; The causes of operational risk are organizational factors, such as governance, management, cultural diversity and communication failure; In terms of policy factors, violation of policies, non-compliance and unclear responsibilities; In terms of personnel factors, employees are improper and employers make mistakes in judgment.

Analyze the reasons for the failure of Bahrain Bank in detail.

First of all, Bahrain Bank did not separate the transaction from the clearing business, and Li Songsong was both the chief trader and responsible for the clearing of its transactions. In most banks, these two businesses are separate. Because letting a trader liquidate his own trading will make it easy for him to hide trading risks or losses. This is an institutional defect.

Secondly, the internal audit of Bahrain Bank is extremely loose. When the loss reached 50 million pounds, the headquarters of Bahrain Bank sent someone to investigate the accounts of Allison, and these losses were clearly recorded on the balance sheet. However, the senior management of Bahrain Bank turned a blind eye to the problems reflected in the balance sheet and believed Leeson's lies. Alison pretended that Citibank had a deposit of 50 million pounds and no one checked Citibank's account.

Poor supervision not only led to the bankruptcy of Bahrain Bank, but also brought three senior managers to legal sanctions.