Ten Shifts in Development of Banking Operation Risk Supervision in the New Situation
(Xu xue-feng Bian Yan-Chi)
Using the experience of national financial supervision of the international financial crisis as a source of reference, China’s banking operation risk supervision is to adjust to the new development to realize ten shifts in financial supervision:
1. Shifting from compliance supervision to combination of compliance supervision and risk supervision, paying attention to construction of risk supervision mechanism.
On the basis of traditional compliance supervision, we should emphasize the warning function of operation risk and discovering and prevention in the process.
2. Shifting from “partitioned” supervision to establishment of unified supervision mode, attaching great importance to overall grasping , prevention and reduction of operation risk of corporative agencies.
We should emphasize administration structure of first-level legal person, develop the awareness of general risk control and assuming of legal person agencies over their branches to increase supervision efficiency and consistency and consolidate internal control and management.
3. Shifting from “once-and-for-all” supervision to consistent supervision, paying attention to process control and subsequent control.
Consistent supervision management mode is an efficient management mode to promote supervised agencies to actually improve operation and management and improve control of risk operation.
4. Shifting from supervision of special operation to integrated supervision, paying attention to functional supervision of supervising corporate governance and internal risk control.
Paying attention to the structure of corporate governance and efficiency of internal risk control is the permanent solution to effecting a radical cure for frequent operation risk and strengthen internal control and management.
5. Shifting from qualitative supervision to combination of qualitative supervision and quantitative supervision, strengthening exposure rating and early warning.
“Core Guidance of Commercial Bank Risk Supervision” put forth by China Banking Supervision Commission is a substantial step to combination of qualitative supervision and quantitative supervision.
6. Shifting from extensive macro-supervision guidance to specific help to supervise banking so as to set up clear and specific internal control and make clear accountability system.
The chief objective of supervision is : objective of efficiency and profits; objective of financial affairs and management of information; objective of laws and regulations on administration.
7. Shifting from single exposure rating control to leading banks to fully unfold internal control evaluation to improve overall banking operation risk management.
“Means of Internal Control Evaluation for Commercial Banks” set up by Banking Supervision Commission is the specific measure for carrying out the concept of supervising legal person, risk, internal control and improving transparency.
8. Shifting from paying attention to internal supervision to laying equal stress to both internal and external supervision and at the same time strengthening external function supervision and proactive regulation and supervision.
We must adjust our conception of supervision and strengthen external supervision; we must strengthen functionalization and unionization of supervision; We should change from “post remedy” into “proactive supervision”.
9. Shifting from single supervision of supervision agency to establishing perfect supervision framework to set up powerful financial supervision coordination agency.
The international financial crisis brought about by American subprime crisis has fully shown that the demarcation between traditional branch financial market is refreshing. Cross-market financial products become very popular, thus, cross-department supervision and coordination and supervision cooperation become increasingly important.
10. Shifting from merely paying attention to supervision of traditional business to financial innovation to continually optimize supervision regulations. While encouraging financial innovation, we cannot overlook the side effect of financial innovation. We need to continuously improve and optimize supervision system and mode and strengthen supervision over financial innovation.
