China Banking

In: Business and Management

Submitted By jathoul
Words 1100
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Chinese Banking System- Risk Management
Central banks are the principal monetary authority of a country or a group of countries and are crucial to the functioning of all banks, financial markets, and the economy. “Central banks typically expose themselves to variety of risks including market, credit, interest rate and liquidity risk”. ( Furthermore, central banks are exposed to significant reputational and operational risks as well as legal risks. Central banks necessitate the combination ofliquidity, safety and the enhancement of returns on invested funds, as the fundamental criteria for managing its reserves and financial risks. Hence, central banks usually implement a separate risk management department that monitors the central bank widerisks.
In the Chinese banking system, China Bank Regulatory Commission (CBRC) is responsible for overseeing risk management of all the Chinese banks. The CBRC requires banks to take operative measures to address the weaknesses in their internal controls and improve their risk management and internal control practices.Due to the complicated and changing economic and market environments, both internationally and domestically, along with the emerging risks on various fronts, the CBRC strives to take responsive actions to facilitate sound and sustainable economic and financial developments in China. It endeavors to identify andmitigate risks in a forward-looking manner, by constantly improving the regulatory framework and supervisory conduct.

In 2011, CRBC in its 12th five year plan, provided guidelines to banks on different supervisory and regulatory controls to manage various risk faced by banks including but not limited to:
CREDIT RISK: The goal of credit risk management is to maximize a bank's risk-adjusted rate of return by maintaining credit risk exposure within acceptable parameters. Since exposure to credit…...

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