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Due to the dramatic changes in the financial market and the diversification of financial products(such as product designs, marketing personnel training, risk management, and etc.), these caused lots operational risks. Under the minimum capital requirement, Basel Committee on Banking Supervision (BCBS) decided to increase the provision of venture capital operations in June 2004 and was implemented in 2006.
The Basel Committee on Banking Supervision (BCBS) defines operational risk as: "The risk of loss resulting from inadequate or failed internal processes, people and systems or from external events." Operational risks may be caused by human or non-human. The outcome of the risk occurrence will cause that banks are bound to suffer significant financial or reputation loss or bankrupt. To preserve the operation of security, banks have to figure how to reduce the risk of loss or to properly control the risk to lower down the impact when the risk occurrence.
New Basel Capital Accord has been proposed to increase the policy of "operational risk capital provision". From simple to high-end risk management operations, the financial institutions must in-depth study the operational risk and bring out the strategy of risk management on "capital adequacy" to ensure that the bank can still operate as usual when the risk occurs.
The purpose of this study is to find the root causes of occurring operational risks. Then, the banks can get the way to establish a good risk management system to improve their business. The difference of banking and other industries is that the banks’ source of funding is not only from shareholders, but also mostly from deposits of the community. If not operating properly, it will bring a big impact to the community. Therefore, the banks need to properly implement the related risk managements.
The study case bank is the pioneer of the domestic bank at business and management. By promoting the experiences of operational risk management, this will make the bank employees to understand the rewards and risks to all the assets and the banks to cooperate on discussing the various issues of the provision of venture capital operations. The professional skills of risk management will be synchronously enhanced and the risk management operations will be actively promoted. Also, to secure the capitals from shareholders, depositors and other creditors will be used more efficiently.
Refer to the occurrence of financial institutions operating risks over past, most of reasons are because the employees improperly implement the internal control and the related laws to cause big losses when the risk occurrence. The majority of factor is from the human. Therefore, besides the operational risk capital provision, the operation of risk management still needs to combine internal controls, internal audit, and corporate management, in order to minimize loss. The establishment and the implementation of all various systems are imperfect, so there is still room for discussion. The ultimate purpose is to expect the banks operating properly in order to preserve the shareholders’ interests.
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