OREANDA-NEWS. March 10, 2011. In 2010, ICBC stepped up efforts on risk management and risk quantitative management to go along with the forthcoming implementation of New Capital Accord. Risk control and management in the Bank reached another new milestone. In the same year, ICBC has accepted the pre-assessment from China Banking Regulatory Commission. This year, ICBC will push further the development and application for the implementation project in order to be the first to fully prepare for the implementation, reported the press-centre of ICBC.

An executive with ICBC said, as early as in the initial period after restructuring and going public, ICBC had established a risk management framework to ensure accountability through clear roles and responsibilities as well as unified coordination from Head Offices to all branches. Last year, ICBC moved further on the set up of risk management scheme. Formulation and revisions on a range of important administrative rules have been completed, covering risk preference, risk management framework, risk reporting, risk and capital adequacy assessment and concentration management. The strength of ICBC's risk management capabilities has been greatly improved through the unified, quantitative, systematic risk preference management system, the advanced risk management framework at group level, the mechanism for identifying, measuring and monitoring of risk, capital and income, the more robust mechanism for reporting of different categories of risk in all subsidiaries and the clear concentration risk management system. ICBC also started the work on country risk management according to the requirement of international expansion, and established administrative measures for country risk management and rating to take statistical analysis on the country risk exposure.

Meanwhile, ICBC made concrete moves to push for quantitative risk measurement and business application in order to lay solid foundation for the implementation of New Capital Accord. The risk management in ICBC has been significantly improved.

First, the effective use of internal rating system on credit risk. ICBC's internal rating system on credit risk is the most advanced among the domestic banks, most comprehensive, most completed internal rating system for retail banking and non-retail banking in China's banking sector. The system reaches the requirement of New Capital Accord's Advanced Approach, reflecting the further effort on the set up and use of internal rating system and creating many "First" in the industry. In 2010, ICBC started rigid control on loan's RAROC (risk-adjusted return on capital) and streamlined the credit risk mitigation management. Internal ratings were fully applied to the loan classification.

At present, ICBC's internal ratings have been widely used in loan marketing, approval, pricing, capital allocation and provision withholding. In the internal rating on retail banking services, last year ICBC started the internal rating model verification and management system to automate the process. RAROC evaluation system for personal customers was put into production as scheduled, meaning a risk management tool that can be seen, touched and used. Internal ratings are now the useful "weapon" to effectively stop the potential risks in personal loans and card business, and provide base for decisions. Rigid control using internal ratings is now proceeding accordingly. Use of measurement results for approval and management of personal loan enters new phase. ICBC also started project on the verification of credit risk measurement. Full verification was carried out on internal rating model and IT data. The result shows that the data for building ICBC internal rating model is exemplary, with good function on scoring and differentiation.

Second, good achievement on the quantitative management of market risk. In 2010, ICBC has finished the ground work of independent R&D project on market risk. So far, ICBC is the only bank in the country employing market risk internal modeling measurement and management system independently developed. In the ICBC's market risk system there are three large databases of reference data, transaction data and market data. The system performs such risk measurement and management functions as market risk measurement, stress testing, back-testing, capital calculation, limit management and risk reporting. Market risk management has been vastly improved driven by the good market risk management at all levels.

Third, start first and finish earliest the advanced approach measurement on operational risk. In 2010, ICBC developed the advanced approach measurement model and put up many functional modules Information gathering is automatic while operational risk tools are managed online. Operational risk & self-assessment control, scenario analysis are some of the new management tools to enrich the management measures. New tools and functions are widely applied in all branches. ICBC has carried out three times of capital estimation by advanced approach using the data inside the bank.