concept
Financial institutions refer to financial intermediaries engaged in financial services and are part of the financial system. Financial services (banking, securities, insurance, trust, funds and other industries) correspond to this. Financial intermediaries also include banks, securities companies, insurance companies, trust and investment companies and fund management companies.
At the same time, it also refers to lending institutions, which provide loans to companies with financial turnover to customers. The interest rate is relatively higher than that of banks, but it is more convenient for customers to borrow because they do not need complicated documents to prove it.
classify
According to different standards, financial institutions can be divided into different types:
1, divided into four categories according to status and function:
First, the central bank. The central bank in China is the People's Bank of China.
The second category is banks. Including policy banks, commercial banks and village banks.
The third category is non-bank financial institutions. It mainly includes state-owned and joint-stock insurance companies, urban credit cooperatives, securities companies (investment banks), finance companies and third-party wealth management companies.
The fourth category is foreign-funded, overseas Chinese-funded and Sino-foreign joint venture financial institutions established in China.
2. According to the operating conditions of financial institutions, they can be divided into financial supervision institutions and supervised financial enterprises. For example, the People's Bank of China, China Banking Regulatory Commission, China Insurance Regulatory Commission and China Securities Regulatory Commission are institutions that exercise financial supervision power on behalf of the state, and all other financial enterprises such as banks, securities companies and insurance companies must accept their supervision and management.
3. According to whether it can accept public deposits, it can be divided into deposit financial institutions and non-deposit financial institutions. The sources of funds for deposit-taking financial institutions are mainly loans from the public in the form of deposits, such as commercial banks, savings and loan associations, cooperative savings banks and credit cooperatives. Insurance companies, trust financial institutions, policy banks, securities companies, finance companies and other non-deposit financial institutions are not allowed to absorb public savings deposits.
4. According to whether it undertakes the national policy financing task, it can be divided into policy financial institutions and non-policy financial institutions. Policy financial institutions are institutions invested by the government and engaged in financial activities according to the government's intentions and plans. Non-policy financial institutions do not undertake national policy financing tasks.
5, according to whether it belongs to the banking system, it can be divided into bank financial institutions and non-bank financial institutions; According to the national nature of capital contribution, it can be divided into domestic financial institutions, foreign financial institutions and joint venture financial institutions; It can also be divided into domestic financial institutions, foreign financial institutions and international financial institutions by country.
6. Classification of China. In 20 10, the People's Bank of China issued the Code of Financial Institutions (hereinafter referred to as the Code), which unified the classification standards of financial institutions in China from the macro level, defined the scope of financial institutions in China for the first time, defined the specific composition of various financial institutions, and standardized the statistical coding methods and methods of financial institutions.
Classification of financial institutions in code:
1. Monetary Authority: 1. China People's Bank; 2. State Administration of Foreign Exchange.
Two. Supervisory organ: 1. China Banking Regulatory Commission; 2. China Securities Regulatory Commission; 3. China Insurance Regulatory Commission.
Three. Bank deposit financial institution: 1. Bank; 2. Urban credit cooperatives (including cooperatives); 3. Rural credit cooperatives (including cooperatives); 4. Rural mutual funds cooperatives; 5. Financial companies.
Four. Banking non-deposit financial institutions: 1. Trust company; 2. Financial asset management companies; 3. Financial leasing companies; 4. Auto financing companies; 5. Loan companies; 6. Money brokerage company.
Verb (abbreviation of verb) Financial institutions in the securities industry: 1. Securities companies; 2. Securities investment fund management companies; 3. Futures companies; 4. Investment consulting company.
Intransitive verb Insurance financial institution: 1. Property insurance company; 2. Life insurance companies; 3. Reinsurance companies; 4. Insurance asset management companies; 5. Insurance brokerage company; 6. Insurance institutions; 7. Insurance loss assessment company; 8. Enterprise annuity.
7. Financial institution for transaction settlement: 1. Exchange; 2. Registration and settlement institutions.
Eight. Financial holding company: 1. Central financial holding company; 2. Other financial holding companies.
9. Emerging financial enterprises: 1, microfinance companies; 2. Third-party wealth management companies; 3. Integrated financial services companies.
function
Financial institutions usually provide one or more of the following financial services:
1. Raise funds in the market, obtain monetary funds, convert them into different kinds of more acceptable financial assets, and form liabilities and assets of financial institutions. This is the basic function of financial institutions, and the financial institutions that exercise this function are the most important types of financial institutions.
2. Trading financial assets on behalf of customers and providing settlement services for financial transactions.
3. Self-operated financial assets to meet customers' needs for different financial assets.
4. Help customers create financial assets and sell them to other market participants.
5. Provide investment advice to customers, keep financial assets and manage customers' investment portfolios.
The first service mentioned above involves the function of financial institutions to accept deposits; The second and third services are the brokerage and trading functions of financial institutions; The fourth service is called underwriting function, and financial institutions that provide underwriting generally also provide brokerage or trading services; The fifth service belongs to consulting and trust functions.
danger
The risk management of financial institutions mainly involves the management of market risk, credit risk and other risks, and different implementation schemes and management strategies are determined according to the characteristics of different risks.
type
1, market risk
Market risk refers to the risk that investors cannot obtain expected returns due to market fluctuations, including adverse fluctuations in prices, interest rates and exchange rates due to economic reasons. In addition to the adverse effects caused by the fluctuation of stocks, interest rates, exchange rates and commodity prices, market risks also include the cost risk of securities lending, dividend risk and associated risks.
Orange county, USA
The bankruptcy of the country highlights the harm of market risk. The county treasurer invests the "orange county portfolio" in derivative securities such as so-called "structured bonds" and "reverse floating interest rate products". When the interest rate rises, the income of derivative products and the market value of these securities decrease, resulting in a loss of $654.38+07 billion in Orange County portfolio. Gibson Company also faces similar market risks, because it bought a large number of interest rate derivatives in anticipation of falling interest rates. When the interest rate went up, the company lost 20 million dollars. Similarly, Procter & Gamble (Procter)
Gamble) participated in interest rate derivatives trading linked to German and American interest rates. When the interest rates of the two countries rise above the minimum interest rate stipulated in the contract (P&G is required to pay the interest rate higher than the commercial paper rate 14 12 basis points), these leveraged derivatives become the burden of the company. After offsetting these contracts, the company lost $654.38 million+$57 million.
2. Credit risk
Credit risk refers to the possibility that one party fails to perform its obligations, including loans, swaps, options and the risk of losses caused by the counterparty's default in the settlement process. Financial institutions will face credit risks when signing loan agreements, OTC contracts and granting credit. Through risk management and control, the counterparty is required to keep enough collateral, pay the deposit and stipulate the net settlement clause in the contract, which can minimize the credit risk.
Since 1995, the problem of credit risk has become prominent in many American banks. According to the report of 1998, its quarterly financial situation was affected by the economic crisis in the Pacific Rim. For example, due to the Asian financial turmoil, JP Morgan (JPMorgan Chase Company) classified its loan of about US$ 600 million as non-performing loans, and its earnings per share in the fourth quarter of 1997 was US$ 65,438+US$ 0.33, which was 35% lower than the US$ 2.04 in 1996 and also lower than US$ 65,438+.
3. Operational risk
Operational risk refers to the risk of loss caused by improper operation of trading or management system, including the risk caused by out-of-control within the company. The forms of out-of-control within the company include exceeding the risk limit without being noticed, ultra vires transactions, fraudulent activities of transactions or back-office departments (including incomplete account books and transaction records, lack of basic internal accounting control), unskilled employees, unstable computer systems and easy access.
1The collapse of Bahrain Bank in February 1995 highlighted the importance of operational risk management and control. The British Committee on Banking Supervision believes that the reason for the collapse of Bahrain Bank is that an employee of Bahrain Futures Company in Singapore overstepped his authority and concealed derivatives transactions, resulting in huge losses, which the management did not know. At the same time, traders are also responsible for unsupervised futures trading and settlement. Bahrain Bank failed to independently supervise the traders' business, and failed to separate the front-office and back-office functions, which led to huge losses and eventually destroyed Bahrain Bank.
Similar mismanagement caused Daiwa Bank in Japan to suffer more losses in the bond market. In 1995, it was found that a bond trader of Daiwa Bank concealed a loss of about $6,543.8 billion because he had the right to consult the company's accounting books. Like Bahrain Bank, this trader of Daiwa Bank is responsible for both trading and accounting. Both banks violated a basic principle of risk management, that is, the separation of trading function and support function.
Another case of operational risk is Kidder Peabody's false profit case. 1in the spring of 994, Kidder confirmed that the "profit" of about $350 million obtained by a trader of the company from buying and selling government bonds originated from the manipulation of the company's trading and accounting systems and did not exist at all. This incident forced Kidder to sell its assets to competitors and eventually entered the liquidation process.
Operational risk can be controlled through correct management procedures, such as complete account books and transaction records, basic internal control and independent risk management, strong internal audit department (independent of transaction and income-generating department), clear personnel restrictions and risk control policies. If the management properly monitors and takes basic risk control measures to separate the back office and trading functions, the losses of Bahrain and Daiwa Bank may not occur, at least the losses can be greatly reduced. These financial failures illustrate the importance of maintaining proper risk management and control.
tactics
In recent years, with the rise of internet finance, the innovative financial management model represented by P2P online lending model has been widely concerned and recognized. P2P borrowers are individuals, mainly taking credit loans to raise funds for the society. The corresponding P2C is an upgraded and evolved version of P2P online lending. P2C still raises funds for the society, and the main borrowers are mainly enterprises. Take Ai Investment, the first online lending platform in P2C mode, as an example. The borrower is an enterprise with stable cash flow and repayment sources. Compared with individuals, the information of enterprises is easier to verify and the source of repayment is more stable; At the same time, compared with the credit loan form of P2P platform, the P2C model initiated by Ai Investment requires the borrower to have guarantee and mortgage, which is relatively better in security. P2C loans that love investment are strictly limited to small and medium-sized enterprises with good entity operation, loan demand and fixed assets mortgage. At the same time, relying on the offline multi-financial guarantee system built by Ai Investment, the inherent contradiction in the P2P model is completely solved structurally, and the security guarantee is more practical and powerful.
First, the management strategy of market risk
Financial institutions must face interest rate risks when maintaining suitable positions and trading with interest-sensitive financial instruments (for example, changes in interest rate level or volatility, the length of prepayment period of mortgage loans and credit differences between corporate bonds and emerging markets may bring risks); Market makers in foreign exchange and foreign exchange options markets may face foreign exchange risks when maintaining certain foreign exchange positions, and so on. In the whole risk management framework, the Market Risk Management Department, as the executive department under the Risk Management Committee, is fully responsible for the market risk control of the whole company and reports directly to the CEO. The Ministry has several international offices in key business areas, all of which implement matrix responsibility system. In addition to reporting to the Global Risk Manager, they also report to the local non-transaction management department at the next higher level.
The Market Risk Management Department is responsible for writing and submitting risk reports, and formulating and implementing the company-wide market risk management program. The risk management outline distributes the risk limits approved by the Risk Management Committee to all business units and trading counters, and evaluates, supervises and manages the implementation as a reference; At the same time, report the special exemption of the risk restriction exception, and confirm and publish the relevant regulatory provisions of the management organ. The risk management outline provides a clear framework for financial institutions' risk management decision-making.
The Market Risk Management Department regularly conducts risk assessment for each business unit. Under the leadership of the Global Risk Manager, the whole risk assessment process is jointly completed by the Market Risk Management Department, senior traders and risk managers of various business units. Due to the participation of other senior traders, risk assessment itself provides guidance for the company's risk management model and method.
In order to correctly evaluate various market risks, the market risk management department needs to confirm and measure various market risk exposures. The market risk measurement of financial institutions begins with the confirmation of relevant market risk factors, which varies from region to region and market. For example, in the fixed income securities market, risk factors include interest rate, yield curve slope, credit difference and interest rate fluctuation; In the stock market, risk factors include stock index exposure, stock price fluctuation and stock index difference; In the foreign exchange market, the risk factors are mainly exchange rate and exchange rate fluctuation; For commodity market, risk factors include price level, price difference and price fluctuation. Financial institutions should not only confirm the risk factors of a specific transaction, but also determine the relevant risk factors as a whole.
The Market Risk Management Department is not only responsible for measuring and evaluating various market risk exposures, but also for formulating standards and methods for risk identification and evaluation, and submitting them to the Global Risk Manager for approval. The methods to confirm and measure risks are: VAR analysis, stress analysis and scenario analysis.
According to the confirmed and measured risk exposures, the market risk management department sets risk limits for them respectively, and the risk limits change with the change of trading level. At the same time, the market risk management department cooperates with the financial department to set appropriate limits for each business department. By consulting the senior risk manager, the market risk management department strives to make these limits consistent with the company's overall risk management objectives.
Second, the credit risk management strategy
Credit risk management is an integral part of the overall risk management framework of financial institutions, and the credit risk management department under the Risk Management Committee is fully responsible. The credit risk management department is directly responsible to the Global Risk Manager, who reports to the CEO. Credit risk management departments implement credit regulation and management on a global scale through professional evaluation, quota approval and supervision. When investigating credit risk, the credit risk management department should balance the relationship between risk and income and predict the actual and potential credit exposure. In order to optimize credit risk management globally, the Credit Risk Management Department has formulated various credit risk management policies and control procedures, including:
(1) Establish internal guidelines for the most important potential credit risk exposures, which shall be supervised by the general manager of the Credit Risk Management Department.
(2) The initial credit approval system shall be implemented, and abnormal transactions shall be approved by members designated by the Credit Risk Management Department.
(3) Implement the credit limit system, monitor all kinds of transactions every day, and avoid exceeding the limit.
(4) Conclude specific agreement terms on mortgage, cross-breach, right of set-off, guarantee, emergency risk contract, etc.
(5) Establish mortgage standards for financing activities and guarantee contract commitments.
(6) Conduct regular analysis of potential risk exposure (especially derivatives transactions).
(7) Scenario analysis of various credit portfolios to assess the sensitivity of market variables.
(8) Assess the sovereign risk regularly through the relevant analysis of economic and political development.
(9) Cooperate with global risk managers to conduct special evaluation and supervision on long-term and large-scale inventory positions.
Third, operational risk management strategy
As an intermediary of financial services, financial institutions directly face market risk and credit risk, both of which are generated in the normal course of activities. In addition to market risk and credit risk, financial institutions will also face indirect risks related to operations, affairs and logistics, which can be attributed to operational risks.
In the rapidly developing and increasingly globalized environment, when the transaction volume and product quantity in the market increase and the complexity increases, the possibility of this risk is also increasing. These risks include: operation/settlement risk, technical risk, legal/document risk, financial control risk, etc. Most of them are interrelated, so the actions and measures of financial institutions to monitor these risks are also comprehensive.
Usually, the CEO of a financial institution is responsible for monitoring the company's global operations and technical risks. The CEO implements various long-term strategic measures to strengthen the monitoring of operational risks by optimizing global information systems and databases. General preventive measures include: supporting the company's business to develop into multi-entity, multi-monetization and multi-time; Improve control over complex cross-entity transactions. Promote the standardization of technology and operating procedures and improve the alternative utilization rate of resources; The principle of eliminating redundant regional requests; Reduce technology and operating costs, effectively meet the needs of market and regulatory changes, and control the overall operational risk of the company in the most appropriate range. Relying on strategic cooperation, financing guarantee companies provide enterprises with on-site review before lending, qualification review, business process review, business ability and financial statement review, and can basically do on-site supervision after lending, and check the use of funds and business operation every month to ensure the normal operation and repayment ability of enterprises to the greatest extent, thus ensuring the safety of investors' funds. The counter-guarantee measures of investment mortgage loans, equity and accounts receivable to guarantee companies, which will have stronger counter-guarantee measures compared with banks. The guarantee company is equivalent to adding a layer of full interest guarantee to isolate risks, which is to ensure the safety of investors to the greatest extent.