The Engineering of China Commercial Bank Operational Risk Measurement

Xie, Yulei; Wu, Ya-wen; Hu, Yuchen

doi:10.1016/j.sepro.2011.08.050

Cited by 4 publications

(5 citation statements)

References 1 publication

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“…Operational risk develops due to internal factors such as personnel disability, system weakness, lack of technology, and external events (Xie, Wu, & Hu, 2011) such as natural disasters. Therefore, as a business institution, a bank should emphasize the need for adequate internal controls, quality supervision, policies and restrictions, and risk measurement and monitoring to minimize risk.…”

Section: Risk-weighted Assetsmentioning

confidence: 99%

Highlighting Differences in Cash Flow from Investing Activities and Capital Adequacy Ratio Relationship between Indonesian and Malaysian Commercial Banks

Samryn¹

2022

ASS

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This study compares the impact of Cash Flow from Investing Activities (CFI) on the Capital Adequacy Ratio (CAR) between Indonesian and Malaysian commercial banks. The study uses time-series data from the countries' big-five banks from 2009 to 2013. This study engages the regression model to measure the CFI's impact on CAR and then applies a Chow test to compare the discrete regression output between the two countries. The statistical tests reveal that the CFI of Indonesian banks correlated negatively with the CAR, while Malaysian banks showed a positive correlation. Consistent with the correlations, the influence of CFI on CAR in both countries is equally significant. By a Chow test, this study concluded that the CFI's impact on CAR significantly differs between the banks in the countries. From the literature perspective, the CFI and CAR relationship of Malaysian banks is closer to the findings of previous detached studies. The figures indicate that nowadays, Malaysian banking harvests cash inflow from their past investments. Otherwise, the Indonesian banks portray the ongoing spending for long-term investment during the recent five years. This preference results in a consistent decrease in CFI when the CAR moves upward. Departing from the existing differences, to optimize the CFI and CAR relationship, this study suggests the CFI and CAR equilibrium formulation for banks to avoid cash shortages and failure to earn interest due to capital buffer retaining to maintain a high ratio of capital adequacy.

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Section: Risk-weighted Assetsmentioning

confidence: 99%

Highlighting Differences in Cash Flow from Investing Activities and Capital Adequacy Ratio Relationship between Indonesian and Malaysian Commercial Banks

Samryn¹

2022

ASS

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“…Wahlström recommends for addressing this schism within banks to encourage a wider debate about the different approaches for implementation of Basel II. Xie et al (2011) explained that drawing specific reserve separately for operational risk is one of the primary requirements of Basel II technique. Since 1990, as serious loss incidents in operation risk often occurred all over the world, operational risk has been taken account into the risk management framework for the first time in Basel technique.…”

Section: Introductionmentioning

confidence: 99%

An empirical study to measure the effects of various factors on operating loss

Valahzaghard¹,

Araghi²,

Papkiyadeh³

et al. 2012

MSL

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In this paper, we present an empirical investigation to measure the effects of various factors on operating loss in one of major Iranian banks called Bank Mellat. The proposed study of this paper uses a standard questionnaire and distributes it among 57 people who are mainly in top management levels. The questions are categorized into five groups including events related to the processes and methods, events outside the organization, related events within the organization and business disruptions and system failure. The results of our survey confirm that the loss associated with events related to the processes and methods increases operating risk meaningfully, the loss associated with business disruptions and system failure increases operating risk meaningfully and the loss associated with related events within the organization increases operating risk meaningfully. However, our survey do not confirm that the loss associated with events outside the organization increase operating, risk meaningfully. Finally, the preliminary survey of our analysis shows that there is not enough evidence to believe that the effects of business disruption and internal affairs are significantly different from the other event.

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“…However, this situation changed after the 2007-09 financial crisis. For example, Chinese banks invested more in software and staff IT training to improve operational risk management (Xie et al, 2011;. Banks in Romania, the US, Bosnia and Herzegovina all improved their operational risk management by adding more big data and IT management skills (Dumescu et al, 2012;Kozarevic & Kozarevic, 2016;McLaughlin, 2013).…”

Section:  Operational Riskmentioning

confidence: 99%

“…Studies can only focus on one or perhaps a few points of operational risks. For example, and Xie et al (2011) both analysed operational risk control of Chinese commercial banks based on the Basel Accord II with a questionnaire and Monte Carlo Simulation, respectively. Through analysis, suggested that Chinese commercial banks should build an IT platform which can integrate the management system, and train employees to improve operational risk management.…”

Section:  Operational Riskmentioning

confidence: 99%

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Comparative bank financial risk management models in fintechs and challenger banks

Zhao¹

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Risk management in banking operations is a popular topic among researchers in the fields of management and banking. Due to developments in technology, research on financial technology has also become a hot topic. Banks and financial technology companies (fintechs) need to learn what risks impact their operations and how to manage these risks effectively. The aim of this study is to investigate the relationship between risk management and bank performance, compare it between traditional banks and challenger banks/fintechs, and make suggestions on how to improve performance by analysing historical data. This thesis adopts a mixed-method approach, estimating risk variables and their impacts on bank performance through panel data regression models (random-effects and generalised method of moments) and conducting case studies to contribute to knowledge in theory and practice. This research investigates the relationship between five main types of risks (credit risk, market risk, liquidity and capital risk, reputational risk, and operational risk) and bank performance measured by three variables (ROA, ROE and EPS). This study confirms the importance of risk management in bank performance. For example, credit risk variables show negative impacts on all banks, which suggests that reducing credit risks could increase bank performance. Market risk variables are complex with both positive and negative effects on bank performance. Thus, banks should keep market risk at a balanced level to receive better performance. Moreover, bank performance could be increased by increasing liquidity, capital and reputation as well as reducing debt, operational issues and costs. The contributions of this research include the enhancement of literature on the relationship between bank performance and risk management. Also, this research creates a greater awareness of risk management for challenger banks and fintechs. Moreover, it fills gaps in the literature by comparing results for traditional banks with those for challenger banks and fintechs. The results of this research offer new insights into risk management for both traditional banks and challenger banks and fintechs for iii academics and have the potential to assist traditional banks and challenger banks and fintechs in managing their risks and improving their efficiency in practice.

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The Engineering of China Commercial Bank Operational Risk Measurement

Cited by 4 publications

References 1 publication

Highlighting Differences in Cash Flow from Investing Activities and Capital Adequacy Ratio Relationship between Indonesian and Malaysian Commercial Banks

Highlighting Differences in Cash Flow from Investing Activities and Capital Adequacy Ratio Relationship between Indonesian and Malaysian Commercial Banks

An empirical study to measure the effects of various factors on operating loss

Comparative bank financial risk management models in fintechs and challenger banks

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