How Commercial Banks Manage Risk

How do commercial banks manage risk? The risk management system of commercial banks is based on asset risk management and consists of three subsystems: bank risk measurement system, bank risk control system and bank risk supervision system. Risk management is another important work of commercial bank management. The following is how I organize the commercial banks to manage risk, for your reference and reference, I hope it can help the friends in need.

How commercial banks manage risk1

(a) Interest rate risk management

Although the development of off-balance-sheet business of commercial banks in recent years has opened up a wider range of non-interest income sources for the banks, interest income still occupies an important share of the total income of the banks. the macro-economic changes in the 1980s have brought about the market interest rates. After the 1980s, macroeconomic changes brought about fluctuations in market interest rates, which seriously affected the interest income of commercial banks, and the risk of interest rate fluctuations has become one of the basic risks of commercial banks. Therefore, interest rate risk management is crucial.

(2) Credit Risk Management

Commercial bank credit risk refers to the likelihood that the borrower will not be able to repay the loan according to the contract after the bank lends money. It is also known as default risk. It is one of the traditional and major risks of commercial banks.

Commercial bank credit risk management is a complete control process, this process includes pre-control, process control and post control.

Pre-control, including the development of risk management policies, methods, the development of credit investment policy, approved customer level and risk limits, to determine the total customer credit most.

Process control, including the development of authorization programs in accordance with the principle of limited authorization, improve due diligence and risk assessment mechanisms, and review various types of over-authorized credit operations.

Ex-post control includes on-site or off-site inspections of the implementation of credit risk management policies and systems and the implementation of credit projects, as well as post-evaluation of post-loan management and asset quality conditions, and the corresponding adjustment of credit policies and authorization programs.

In the whole risk control process, the important link is the risk identification of individual assets, i.e., the overall asset portfolio composed of a collection of several individual assets. In this regard, the two-dimensional rating system consisting of the customer rating system and the debt rating system (loan risk classification) is another important element of risk identification.

(C) investment risk management

With the increase in the variety of commercial bank investment business, the management of securities investment risk is increasingly important. Securities investment risk includes securities issuer credit risk, market price risk, interest rate risk, exchange rate risk and so on. Most of the securities investment risk estimation using mathematical methods, such as securities price difference rate method, securities return deviation method. Risk treatment includes: investment in market research and prediction, risk prevention and the use of diversified investment principles and a variety of hedging instruments; investment period to do a good job of market tracking, at any time to understand the risk of movement; the emergence of the problem, the opportunity to get rid of, get rid of the risk, reduce losses.

How do commercial banks manage risk2

First, the prevention of credit risk:

(1) the use of international advanced technology and experience as soon as possible to establish in line with international standards of the bank's credit internal rating system and risk model. The use of quantitative methods to accurately price risk can not only improve the efficiency of the asset business, but also set different asset prices according to the different risk categories of the asset, which not only reduces credit risk, but also improves the bank's profits and expands market share through product differentiation.

(2) Establish a perfect internal control mechanism and incentive mechanism, strictly control the process of asset business such as loans, and clarify the relationship between responsibility and revenue, such as the implementation of post-loan accountability, audit and loan separation and other measures.

(3) Make full use of scientific and technological information means to establish and improve the credit risk monitoring information system as soon as possible, set up a basic database of customers and develop a customer tracking system to realize the dynamic management of credit risk.

(4) By comparing the opportunity costs of asset investment programs, choose timely exit strategies to achieve the best asset allocation results.

(5) Utilize emerging tools and technologies to reduce and control credit risk and establish a scientific performance evaluation system. The main use of loan securitization and credit derivatives to achieve the purpose of early recovery of bonds and transfer of credit risk, while establishing a performance evaluation system to achieve risk portfolio management.

2. Sound and independent internal risk management system.

The commercial banks set up a special control department for interest rate risk supervision within the bank, which is directly responsible for the bank's board of directors or president, and develops a clear protocol for interest rate risk management and monitoring, and divides the interest rate authorization authority and responsibility. Reasonable determination of internal and external interest rates. The internal interest rate is the interest rate used for the bank's internal fund accounting. By determining internal interest rates that reflect market changes while taking into account the interests of various departments, we guide funds to concentrate on high-yield, low-risk projects, reduce overall risk, and realize the bank's strategic development intentions. Coordinate and cooperate with other departments to establish a system for determining external interest rates with safety as a prerequisite and efficiency as the center.

3, innovation of commercial banks to harness the risk of products. Although there are currently obstacles to product innovation in the system, regulation and other aspects, but can take a step-by-step strategy.

First, according to the development trend of the domestic financial market, the basic preparation of derivative products.

Including the collection of basic data, modeling and model validation revisions. Based on the understanding of the foreign currency derivatives market, research on derivatives such as Forward Rate Contracts (FRA) Interest Rate Swaps (IRS) Interest Rate Options (Interest Rate Options) and the portfolio of structured products based on these basic derivatives, and do the basic work of future risk management for commercial banks.

Second, develop and utilize active liabilities or products that improve asset liquidity and improve the asset-liability portfolio, such as issuing subordinated bonds.

Try to create products that connect different markets, linking deposits to the bond market and deposits to money market returns, such as money market funds and structured deposits. When the policy is relaxed and the market is gradually improved, products such as forward interest rate contracts, interest rate swaps, interest rate options, bond index options, etc. will be launched. By studying the trading of funds under the conditions of interest rate marketization, especially the trading of derivative financial instruments, the risk exposure of the whole bank will be eliminated, and interest rate risks will be prevented and resolved.

Third, the prevention of operational risk

1, the construction of internal risk control culture.

Operational risk exists in the bank's normal business activities, the bank only in the establishment of effective operational risk management and robust operational control culture, senior management to a high standard of ethical conduct strict requirements at all levels of managers, operational risk management will be the most effective. Creating a culture of risk control means that all employees abide by a uniform code of conduct when engaging in business activities, and that all employees in units with significant operational risk clearly understand the Bank's operational risk management policies and have sufficient understanding and mastery of risk sensitivity, tolerance levels, and means of control.

2. Strengthen the construction of internal control system.

The management of operational risk is largely dependent on the perfection of the internal control system. The key to preventing operational risk is to control the actors and improve their business quality.

In further improving the system at the same time, change the business hard constraints, personnel soft constraints, the implementation of the three-separation system:

(1) the separation of management and operation, that is, management personnel, especially senior management personnel can not be engaged in the operation of the specific business, to do business must be done through the necessary business processes;

(2) separation of the bank and the customer, the bank for the convenience of the Customers, under the premise of risk prevention, can try to simplify the procedures, but the account manager can not handle the business on behalf of the customer;

(3) separation of program design and business operations. That is, program designers cannot engage in business operations.

How Commercial Banks Manage Risks3

Focus on the comprehensive quality of employees.

First, the main marketing force is selected. At present, many bank outlets still exist marketing staff ageing, or part of the staff marketing enthusiasm is not high, so in the carry out "full marketing" ` premise, can be the account manager, young employees as the focus of marketing personnel to drive the other people's marketing enthusiasm, and to strengthen the assessment of incentive mechanism, performance-oriented to prompt the The staff more actively and effectively carry out marketing.

The second is to focus on improving the business quality of new employees. The company's business is to strengthen the standardized operation of the counter business, and to strictly control the opening of accounts, seal inspection, reconciliation, loss and other gates. Improve the quality of credit investigation, accurately grasp the true information of the borrower, to prevent misjudgment to the higher bank review and approval.

The third is to carry out case warning education. In response to the problems found in the comprehensive inspection by the CBI, the problem accounts were sorted out, effective rectification was promoted, and a case study manual was formulated and distributed to all outlets, and employees were organized to study in various meetings, especially to strengthen the training and education for the young account managers, wealth managers, and counter managers, and to effectively enhance the awareness of risk and compliance.

The fourth is to persistently build a culture of compliance. The company's annual "Compliance System Month" study and training is normalized, from time to time issued compliance tips, organized to carry out the new employee compliance test, the test is not compliant with the "one-on-one" talk, urged to grasp the key points of business risk and key people.

Focus on the comprehensive ability of the person in charge of the outlet to improve.

At present, new employees are usually directly assigned to the grassroots outlets to exercise, so it is crucial to enhance the comprehensive ability of the person in charge of the outlets, especially the ability to control risks.

First, the "three lines and one grid" management performance. The first is to make sure that the person in charge of the outlet is really an administrator, so that every employee of the outlet is a supervisor, and to investigate and monitor the abnormal behavior of the employees in a timely manner, and to establish a risk investigation mechanism that is not afraid of violating the law.

The second is to effectively identify the weak areas of the outlets. According to the regional characteristics of the outlets, outlets group type, outlets short board type, etc., one by one to analyze the shortcomings, to identify breakthroughs, focused, and direction to improve the difficult status quo, as soon as possible to enhance the comprehensive strength.

Third, control the direction of business development. In the daily business activities, the person in charge of the branch should keep up with the new situation of financial development, and strive to improve the phenomenon of eating big customers, reduce the dependence on the big customer deposits, and actively expand the county rural long-tail customers, to avoid the instability of the big customers and bring business fluctuations. It should continuously strengthen the awareness of all staff in soliciting deposits, enhance the skills and techniques of soliciting deposits, stabilize the deposits, and adjust the deposit fluctuations within a controllable range. Efforts should be made to improve the problem of insufficient attention to internal operational risks and customer service in business outlets. The company's newest product is a new, more advanced version of its original product, which is now available for sale in the U.S. and Canada.

Strengthening reputation risk management and consumer protection.

Financial services for the revitalization of the countryside is a key task and the first task, with the awareness of the protection of the rights and interests of financial consumers and external regulatory penalties "double strengthened", the bank must not be in the field of reputational risk management and protection of the rights and interests of consumers "chain". "

First of all, it's a good idea to have a good time.

First, the management focus should be clear. The "three rural" service, counter service, self-service area management, business charges, agency insurance, wealth management business, credit risk, employee management and other hot, sensitive issues as the main content of the reputation risk management, regular research and analysis and investigation of reputation risk potential, the matters that may lead to the risk of public opinion, the development of a plan, quickly disposed of to ensure that no reputational risk events. The company will formulate a plan for matters that may trigger public opinion risks and deal with them quickly, so as to ensure that no reputational risk incidents occur.

The second is to establish an emergency response mechanism for reputational risk. The company's main focus is on the development of county-level and township-level official media and county self-publishing media accounts. Once a public opinion event occurs, the company will urgently activate the emergency response plan, form a special working group, clearly define the division of responsibilities, and coordinate and link up between departments; actively cooperate with the public security, supervision and other departments in the forensic and investigative work, and coordinate with the publicity departments and organizations to relieve the pressure of the event. In particular, in the process of dealing with credit letters and visits, the formation of special working groups and emergency response teams, and the arrangement of special attention to public opinion and the latest trends in the incident, to prevent the fermentation of similar events, to avoid further deterioration of the situation.

Third, strengthening external contacts.