Exploring Operational Risk Management of Securities Firm within Basel II:Revised International Capital Framework

• Main Authors: Ming-huang Wu, 吳明凰
• Other Authors: Yen-Sheng Huang
• Format: Others
• Language: zh-TW
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/pkx45j

碩士 === 國立臺灣科技大學 === 財務金融研究所 === 95 === The financial situation in the 21st century is strongly influenced by globalization and regional integration, as well as increased interaction among financial institutions. Hence, there is a real need for an international management accord to ensure smooth financial operation within these institutions. With the climbing loss incurred due to increased operational risks, the Basel Committee on Banking proposed the addition of obvious risks to Trust and Market risks, forming a new proposal on the operational risks within the framework of capital management. In June 2004, this proposal was formalized in the New Basel Capital Accord (hence termed as Basel II) and was implemented at the end of 2006. The Banking Bureau of the Executive Yuan Financial Supervisory Commission amended the ‘Management Method of Capital Adequacy of Banks’. Banks in Taiwan are requested to formulate relevant measures in accordance to Basel II, and plan appropriate risk management steps to ensure compliance to national laws and to increase their market competitiveness, as well as to adhere to global formal implementation of Basel II in 2006. In order to uplift the accuracy, rationality and efficiency in resources appropration of the capital adequacy management of the securities firms in the country, and as well as to follow the international trend under Basel II, the Securities and Futures Bureau of the Executive Yuan Financial Supervisory Commission directed the Taiwan Stock Exchange Corporation to carry out and to formulate the ‘Draft of New System on Capital Adequacy of Securities Firms’. This study analyses 28 participating securities firms, and based on the result of such analysis, adjustment of the risk coefficients will be performed. The timeframe of implementation of the new syatem will then be assessed. It is expected that it will be put into practice in 2008. The objective of this thesis is to look into the context of Basel II, to investigate the impact of the standards of national security firms risk management and operational risk on the regulatory capital adequacy ratio of a securities firm, as an analysis of financial institute operational risk management policies and implementations. Additionally, case-study model of company operational risk management policies compliant to BaselII, as a tool for operational risk management and to strengthen operational risk identification, will be performed. Based on the study of this thesis, we propose, as a reference for financial institutions and securities firms, the following steps to implement an operational risk management system and the analysis of challenges faced by risk management tools used by financial institutions: 1.Proposal to adopt the Basic Indicator Approach (BIA), to strengthen internal audit, internal control and to implement an excellent operational risk management system, as well as to adopt a fixed rate (α value), after approval by central management, of 15% adopted as appropriate operational risk amount. 2.Internal audit personnels should not be limited to traditional internal control functionality. They should understand the overall risk management procedure. Operational risk management must have its professional capability uplifted. 3.Establishment of specialized agency to implement loss database. Helping financial establishments to understand property loss experiences, assessing the sufficiency of the internal loss information, implementation of situational analysis, making decision on loss distribution, and the assessment of firm-wide exposure to operational risk management, all will have their positive benefits.