商业银行市场风险管理指引 Market Risk Management of Commercial Banks Guidelines

ategy， management capability， capital strength and overall risk tolerance level， and in compliance with the relevant requirements of the CBRC regarding market risk management. The main particulars of market risk management policies and procedures shall include：

　　1. the businesses that may be conducted， financial instruments that may be traded or invested in， and investment， hedging and risk mitigation strategies and methods that may be adopted；

　　2. the level of market risks that can be borne by a commercial bank；

　　3. organizational structure， authority structure and accountability mechanism for market risk management with a clear division of labour；

　　4. procedures for identifying， measuring， monitoring and controlling market risks；

　　5. market risk reporting system；

　　6. market risk management information system；

　　7. internal control of market risks；

　　8. external audit on market risk management；

　　9. allocation of market risk capital； and

　　10. contingency plans in the event of major market risks.

　　Commercial banks shall revise and improve market risk management policies and procedures in a timely manner in accordance with the market risk status of the bank and the change in the external market.

　　The market risk management policies and procedures of commercial banks and the major revision thereof shall be approved by the board of directors. The senior management of commercial banks shall elucidate the bank‘s market risk management policies and procedures to the personnel involved in market risk management. Personnel involved in market risk management shall have a full understanding of their authority and duties in connection with market risk management.

　　Article 12　Prior to launching a new product or a new business， a commercial bank shall fully identify and assess its inherent market risks， establish the corresponding internal examination and approval， operational and risk management procedures， and obtain the approval of the board of directors or its authorized special committee/department. The internal examinat

ion and approval procedures for a new product or new business shall include review and acceptance of its operational and risk management procedures by relevant departments such as the business operation department， the department in charge of market risk management， the legal/compliance department， the finance and accounting department and the settlement department.

　　Article 13　Market risk management policies and procedures shall be applied on a consolidated basis and， as far as possible， to subsidiaries with independent legal person status， including offshore subsidiaries. However， commercial banks shall be fully aware of the legal differences and obstacles to capital movement among subsidiaries， and shall adjust the risk management policies and procedures accordingly in order to avoid underestimation of market risks in the process of netting positions between subsidiaries where there are legal differences and obstacles to capital movement.

　　Article 14　Commercial banks shall separate their bank accounts and trading accounts in accordance with the requirements of the CBRC on administration of capital adequacy ratio， and shall adopt such market risk identification， measurement， monitoring and control methods as commensurate with the nature and characteristics of its bank accounts and trading accounts.

　　Commercial banks shall formulate more detailed and specific risk management policies and procedures for different types of market risk （e.g. interest rate risks） and different types of business （e.g. derivatives trading）， and shall maintain the consistency among them.

　　Section Three　Market Risk Identification， Measurement， Monitoring and Control

　　Article 15　Commercial banks shall break down and analyze the market risk factors in each business and product， and identify the types and nature of the market risks in all trading and non-trading businesses in a timely and accurate manner.

　　Article 16　Depending on the nature， scale and complexity of its businesses， a commercial bank shall select appropriate and generally accepted measurement methods for the different types of market risks in its bank accounts and trading accounts， and shall measure， on the basis of reasonable assumptions and parameters， all the market risks it bears. A commercial bank shall accurately calculate as much as possible the market risks that can be quantified and assess those that are difficult to be quantified.

　　Commercial banks may use different methods or models to measure the different types of market risks in its bank accounts and trading accounts. Methods for measuring market risks include gap analysis， duration analysis， foreign exchange exposure analysis， sensitivity analysis， scenario analysis and internal-model based value-at-risk calculation. Commercial banks shall be fully aware of the advantages and limitations of each method for measuring market risks， and shall apply other analytical means such as stress testing as a complement.

　　Commercial banks shall， as far as possible， aggregate the market risks （interest rate risks in particular） measured in its bank accounts and trading accounts on a bank-wide basis in order to enable the board of directors and the senior management to understand the overall market risk level of the bank.

　　The board of directors， the senior management and the management officers involved in market risk management of commercial banks shall understand the methods and models adopted by the bank for measuring market risks and the assumptions thereof in order to have an accurate understanding of the measurement results of market risks.

　　Article 17　Commercial banks shall adopt measures to ensure the reasonableness and accuracy of the assumptions， parameters， sources of data and measurement procedures. Commercial banks shall evaluate the assumptions and parameters of the market risk measurement system on a regular basis and formulate interna

l procedures for revising assumptions and parameters. Major revisions of assumptions and parameters shall be subject to the examination and approval of senior management.

　　Article 18　Commercial banks shall revaluate the trading account positions based on market value at least once a day. The revaluation of market value shall be the responsibility of the middle office， back office， finance and accounting department or other related functional department or personnel that are independent from the front office. The pricing factors to be used in revaluation shall be obtained from channels independent from the front office or otherwise verified independently. The methods and assumptions applied to valuation by the front office， middle office， back office， finance and accounting department and department in charge of market risk management shall be consistent as far as possible. If they are not fully consistent， certain calibration or adjustment methods shall be formulated and applied. In the absence of market prices for market value revaluation， commercial banks shall determine the criteria for selecting and the channel for obtaining alternative data， and the method for calculating fair prices.

　　Article 19　The CBRC encourages commercial banks with relatively complex businesses and relatively high level of market risks to gradually develop and use internal models to measure value at risk and to conduct quantitative estimation of the level of market risks borne. Value at risk refers to the estimated potential maximum loss that is likely to be caused by change of market risk factors， such as interest rate and exchange rate， to a certain cash position， asset portfolio or organ within a particular holding period at a given confidence level.

　　Article 20　Commercial banks that use internal models shall reasonably select and regularly examine and adjust the modelling techniques （such as variance-covariance matrices， historical simulations and Monte Carlo simulations） as well as the modelling assumptions and parameters in accordance with the business scale and nature of the bank and with reference to internationally adopted standards， and shall establish and implement internal policies and procedures for introducing new models， adjusting existing models and testing model accuracy. Testing of models shall be conducted by personnel that are independent from those that develop and run the models.

　　Commercial banks that use internal models shall incorporate the application of models in day-to-day risk management. The information provided by the internal models shall become an integral part of the process of planning， monitoring and controlling market risk asset portfolio.

　　Commercial banks that use internal models shall appropriately understand and apply the calculation results of the market risk internal models， fully aware of the limitations of the internal models and use stress testing and other non-statistical measurement methods to complement the internal models.

　　Article 21　Commercial banks shall conduct back testing regularly to compare the estimated results from using market risk measurement methods or models with the actual results and， on the basis of such comparison， adjust and improve the market risk measurement methods or models.

　　Article 22　Commercial banks shall establish comprehensive and rigorous stress testing procedures to conduct on a regular basis simulation and estimation of the potential losses that may be caused by sudden events of small probability such as drastic change in market prices， or by unexpected political or economic events， in order to assess the tolerance of the bank to

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