Risk Analysis of Custodianship Business Essay
In our daily study and work, we are all too familiar with the dissertation, which is a tool for describing the results of academic research for academic communication. So do you know how to write a good thesis? The following is a risk analysis paper on custodial business that I have compiled, which is only for reference, let's take a look at it.
To deal with the relationship between business development and risk prevention and control, all custodial business behavior should adhere to the bottom line of risk compliance, which is the prerequisite and condition for the development of custodial business operation and is the lifeline of commercial bank custodial business. It is necessary to strengthen the basic management work and implement it under the framework of the custodian business management system. Each organization of the custodian bank needs to clarify the responsibilities of departments and positions, and use scientific and effective business processes to achieve the use of the system to manage people, use the process to manage things, and further improve the risk management and control capabilities.
Abstract: Under the trend of financial disintermediation, the growth model of commercial banks has gradually changed from capital-dependent to low-capital-consuming. Asset custody business occupies less capital, in addition to stable income from custody fees, it also increases stable capital deposits, creates intermediary income, creates a number of cascading benefits such as settlement, settlement and sale of foreign exchange, and has a significant synergistic effect of the business, which makes it the strategic intermediary business preferred by banks, and the comprehensive contribution is constantly rising. Since 1998, the asset custody business of commercial banks (hereinafter referred to as "custody business") has become larger and larger in business scale, wider and wider in service scope, more and more types of customers, and deeper and deeper in market participation, which have put forward new requirements for risk management and control of custody business. This paper analyzes some risk points of the custodian business and tries to put forward relevant countermeasures, hoping that it can help the sound development of the custodian business.
Keywords: bank; custody business; risk; prevention
I. Introduction to Custodian Business
(a) What is the Custodian Business
"Commercial Bank Custodian Business "refers to the custodian bank based on legal provisions and contractual agreements, the performance of asset custody duties, for funds clearing and other agreed services, and the collection of related fees. According to laws and regulations and contractual agreements, the services provided by the custodian bank may also include accounting and valuation, investment supervision, performance evaluation, integrated financial services for investment management, and other asset service type businesses. As an important part of the modern financial industry, the asset custody industry has introduced a custody mechanism in the multi-level capital market, which plays an irreplaceable role in eliminating market information asymmetry, improving the efficiency of capital management and transactions, safeguarding the safety of investors' assets and promoting the healthy development of the market. For commercial banks, the custodian business generates stable income and does not consume economic capital, especially the custodian assets need to retain a certain percentage of cash assets to cope with various situations due to regulatory requirements, which are often in the form of demand deposits, and have become rare stable and large-volume high-quality deposits under the environment of interest rate marketization. In addition, the custodian business department can also establish a joint mechanism to fully integrate internal capital, channels and projects and other resources to provide customers with a comprehensive package of financial services. Under the background of "new normal" of China's economic development, all commercial banks, facing the new market competition pattern, have seen the advantages of custodian business, and have spared no effort to strengthen the investment in this "capital-saving" intermediary business to enhance the strategic position of custodian business and promote the transformation of the operating structure to asset-light. The company has spared no effort to strengthen its investment in this "capital-saving" intermediate business and enhance the strategic position of its custodian business, promoting the transformation of its operating structure to asset-light. As of the end of June 2016, the asset custody scale of China's banking industry exceeded RMB 100 billion for the first time, amounting to RMB 103.5 trillion, with a year-on-year growth of 53.6%. since 2012, the growth rate of the asset custody scale of China's banking industry has always been maintained at more than 50%, and has been on the rise year by year. In the industry scale continues to grow rapidly at the same time, the main market participants are also expanding, the domestic commercial banks with public fund custodian qualification has now reached 27, which ranked first in the Industrial and Commercial Bank of China's assets custodian scale has reached 13 trillion yuan.
(2) the key points of the custody business
The asset custody business mainly serves the asset management industry, and is an important platform and link connecting the main bodies of the investment and financing market, and its key points mainly lie in the diversity of customers. In recent years, the rapid development of the asset management industry has brought about increasingly rich and diversified custodian client resources, from the initial single fund management company to insurance companies, brokerage firms, QFII (qualified foreign investors), the establishment of enterprise annuity companies and so on. Multiple types of services. Custody business mainly provides basic services in five aspects: asset custody, fund clearing, accounting, asset valuation and investment supervision. It can also provide value-added services such as foreign exchange trading, corporate behavior, risk performance, accounting outsourcing, etc. Such value-added services often become the focus of the custodian bank's competition for customers. Wide coverage. Custody business involves almost all the investment varieties in the capital market, covering both domestic and overseas markets. It needs to face all the supervisory departments of China's financial industry, from the People's Bank of China, the Insurance Regulatory Commission (IRC), the China Banking Regulatory Commission (CBRC) to the Bureau of Foreign Exchange (BFE), and even the Ministry of Labor and Social Security. Complexity of operation. Custodian business is characterized by a particularly large amount of data, a particularly wide range of reports, market rules are particularly complex, customer customization, accuracy and timeliness requirements.
Second, the risk points of the hosting business
With the deepening of the reform and the steady development of the capital market, the hosting business has ushered in a broad opportunity for development, and at the same time also faces risks, there are a number of potential problems and weaknesses:
(a) the risk of the business system
At present, most of the hosting banks are At present, most of the custodian banks are using outsourced custodian business system, due to the historical reasons can not be centralized system management and data **** enjoyment, the degree of automation and batch processing ability is low, in the context of the rapid growth of the market system has been barely supported, overburdened, and suffers from a gradual accumulation of various patches of the plague, becoming the business development of the "bottleneck. The inability to meet the requirements of various new and innovative products greatly affects the efficiency and quality of the business, while increasing the potential risks of operation. Some of the personalized needs cannot be realized due to the inherent system architecture limitations of the outsourcing system, and customers often switch to other banks because the custodian bank is unable to provide certain functional services.
(2) Operational risk
Operational risk refers to the risk of operational errors or violations of operating procedures caused by deficiencies in internal controls or human factors during the operation of various aspects of the hosting business. For example: due to unfamiliarity with the business system functions and process requirements, the operation is carried out before the data is ready, resulting in data errors; the data entered is wrong, and the reviewer does not check it out, and operates on the basis of the wrong data entered, resulting in errors; the data is ready and error-free case with the wrong rules, calling the wrong function, which leads to the calculation of the results of the error; the business system stops being able to be used normally; the business system can not be used normally. Categorization errors, in the absence of uniform standards in the case of the wrong type.
(C) the risk of system construction
The capital market is developing rapidly and is prone to vacuums, the management system and operating procedures have not yet formed a full coverage of the hosting products and processes, and the management system of individual new products needs to be improved and supplemented. P2P hosting, for example, the existing system basically does not involve this area. After the regulatory changes, the system has not been changed accordingly, some provisions are difficult to effectively implement, for example, the regulatory authorities have canceled the approval system to change the filing system, no longer have the product approval, the branch will not be able to apply to the public security organs for the hosting of the product engraved seal.
(iv) Internal management risk
There are large regulatory and supervisory differences between different regulators. The provisions of the Securities and Futures Commission on the insurance assets side may be considered inapplicable, similarly, the direct use of insurance regulations to regulate corporate pensions is also inappropriate, so be sure to pay attention to the type of assets under the custody of the assets and their regulatory authorities, in order to achieve the target; business staffing is insufficient, it is difficult to meet the needs of the rapid development of the business in the face of the increasingly numerous custodianship requirements, the custodianship business workload continues to increase, the requirements for practitioners also In the face of the increasing demands of the custodial business, the workload of the custodial business has been increasing, and the requirements of the practitioners are getting higher and higher, and the quality and capability of the personnel need to be further improved; the access and review mechanism is not clear, the branches have exceeded the authority to handle the business, and the signing of the contract is not standardized; and they have failed to perform the duties of custodian in strict accordance with the contract.
(E) Reputation risk
In the custody business, especially for securities investment funds, if the error reaches or exceeds 0.5% of the net asset value of the fund, in addition to being questioned by the regulatory authorities, information disclosure announcements have to be made. For example, on the announcement of the net value error of ICBC Credit Suisse S&P Global Natural Resources Index Securities Investment Fund (LOF), the custodian bank is listed in the newspaper together with the management company. Once such an announcement is issued, it is not a small blow to the reputation of the custodian bank. A high-impact failure of the custodian's business system, where an important data error in one part of the process is likely to result in a widespread error, can also cast a shadow over the reputation of the custodian bank.
Three, risk prevention countermeasures
How commercial banks to ensure that the hosting business operation norms, to achieve zero error is a question worthy of deep thought. It is necessary to start from the system, system, management and other aspects, to take effective measures to effectively prevent the risk of custodial business:
(a) business system support strong
should be from the actual business of independent development of the whole bank centralized, unified custodial business system, the use of the system to standardize the business process, and to strengthen the management and monitoring of the business. In line with the characteristics of the Internet financial era, strengthen the application of information and big data technology, and strive to ensure that the hardware equipment of the hosting business system operates stably, the software application functions, data processing is accurate and reliable, and to ensure the security and effectiveness of information and data. Actively apply technical systems to realize risk control, and embed the design of risk control in the system architecture layer. Realize unified access to external data and unified management of internal data to effectively control data risks while reducing costs. Before upgrading the system, the system must be equipped with a fallback mechanism. If there is a big problem, the system should be rolled back to the previous version and retested successfully before upgrading again. When switching to a new system, a sufficiently long parallel transition period should be set up, and potential problems should be identified through parallel verification of results, and timely corrections and optimizations should be made, especially checking whether the various risk control measures are in place and whether the needs are met accurately and effectively.
(2) Standardized operations are always in place
There should be a full understanding of the performance risk of the custodial business, and enforcement efforts should be strengthened in terms of performance management and standardized operations. The establishment of a reward and punishment mechanism will reward those who operate in a standardized manner, exercise caution and pay attention to the prevention of business risks, and warn and notify those who operate in violation of the law and do not have a sense of responsibility. In terms of error correction mechanism and business continuity, it is also necessary to be well-prepared and have a complete contingency plan, so that in case of problems, we can quickly locate them and implement the solutions in a timely manner. Following the principles of comprehensiveness, independence and effectiveness, a firewall with appropriate separation is established in business systems and post personnel to achieve the purpose of risk prevention. Business personnel are required to clearly define their job responsibilities, familiarize themselves with system processes to avoid sequential errors or even omissions, implement a review and regular checking mechanism for important data and parameters, and carry out and follow uniform classification and operation standards. In terms of staffing, the necessary personnel should be allocated according to business needs to create a professional, high-quality hosting team.
(C) system construction persistent
To establish an effective hosting business management system, the core is to develop a unified rules and regulations, so that there are rules and regulations to follow, have a basis to follow. All business must develop a corresponding specific system, can not form a system on the lack of. On the basis of in-depth understanding of regulatory policies and regulations as well as product operation mode and relevant requirements, the first task is system construction. Establish a mechanism for regular combing of custodian business systems to check whether they are complete and whether they need to be changed and revised. For the information affecting the custodian business in the market, be able to respond quickly and and carry out logical analysis, especially for the changes in regulatory policies and the emergence of new products, should do a good job of analyzing the impact of the business in advance, and carefully prepare for the response work, such as the analysis of the Internet financial third-party payment posture and regulation, pay close attention to the regulatory dynamics, and reflect the requirements of the new laws and regulations and policies directly to the adjustments of the custodian business processes and systems. Establish communication channels. Improve the hosting business problem reporting system, clarify the reporting path and procedures, and smooth the path to solve problems. Institutions that have questions or suggestions for improvement in their operations can find the specific person in charge and get feedback within the specified timeframe. Avoiding the situation where you don't know who to call when things go wrong due to unclear division of responsibilities and reporting paths. To create a perfect hosting business management system system, need to unite the entire hosting line of synergy.
(D) basic management to do a solid strengthening
To strengthen the basic management work, the hosting business management system framework to implement. Custodian bank organizations need to clarify the department, job responsibilities, the use of scientific and effective business processes, so that the system to manage people, using the process to manage things, and further improve risk management and control capabilities. Strictly enforce the requirements of rules and regulations and put control measures in place. Put in place a good review of product business. For the product business that does not have the conditions, it should not be carried out blindly, but should consider whether it can have strong measures to ensure compliance, understand the regulatory policies, strengthen risk identification, and carry out the business in a compliant manner. Establishing a regular self-examination mechanism to self-discover and self-correct problems in a problem-oriented manner. Regular self-inspection of compliance should be carried out, especially in areas prone to risks and where problems have arisen from previous inspections, to increase self-inspection efforts, identify and correct problems in a timely manner, and solve problems effectively. Establish a bank-wide random inspection mechanism. Increase the frequency of internal inspections, with comprehensive coverage of inspections, especially paying special attention to emerging issues in the industry, analyzing the self-inspection work against them, and refraining from making simple, low-level and repetitive mistakes. Establish an inspection notification and inspection issue tracking system so that corrective matters can be continuously tracked to ensure implementation. In particular, whether the problems identified in previous inspections have been learned from and carefully and comprehensively rectified. Weaknesses that have been identified should be urgently improved and shortcomings made up.
(E) compliance awareness is always taut
To deal with the relationship between business development and risk prevention and control, all custodial business behavior should adhere to the bottom line of risk compliance, which is the prerequisite for the development of custodial business operations and conditions, is the lifeblood of the commercial bank custodial business. Must realize that the risk of custodian business is not only related to the career prospects of individuals, but also related to the reputation of commercial banks, must uphold the concept of risk control priority to improve the awareness of compliance, and expand business under the premise of standardized operation. Strengthen compliance and risk control education and vigorously advocate the concept of compliance and risk control. Focus on training, strengthen the training of business personnel, organize various online and offline training courses to improve the business ability of employees. We have established a mechanism to ensure that the persons in charge of each organization must be qualified to engage in the fund business, so as to ensure that they are familiar with the policy requirements and basic concepts of the custodian business. Regular assessment is carried out to strengthen the awareness of compliance operation of the whole staff, and the compliance wind control is sustained and normalized to avoid the occurrence of incidents that damage the reputation of the custodian bank. The company has become one of the largest commercial banks in the world in terms of development space and innovation, and in order to better protect financial security and safeguard investors' rights and interests, it is necessary to implement the principles of "standardization and efficiency, independent operation, and security" to ensure that the trusteeship business can operate in a stable, efficient and safe manner.
References:
[1]Banking Association. Guidelines on Custody Business of Commercial Banks, 2013 [2] Banking Association. China asset custody industry development report (2016),2016
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[4]Sun Xueli. Research on China's P2P lending model and its regulatory issues[J]. Finance Teaching and Research,2014
[5]Announcement of Fund Share Net Value Calculation Error[N]. Securities Times,2013
[6]Jiang Xianling,Xu Xiaolan. Third-party payment dynamics and regulation: Observations from Internet finance[J]. Reform,2014
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