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

issues identified in internal audit. The internal audit department shall follow up on and inspect the implementation of improvement measures and submit relevant reports to the board of directors.

　　A commercial bank‘s internal audit on the market risk management system shall at least include the following contents：

　　1. the market risk positions and risk levels；

　　2. the adequacy of documentation in the market risk management system；

　　3. the organizational structure of market risk management， the independence of the market risk management function， and the adequacy， professionalism and performance of the market risk management personnel；

　　4. the types and scopes of risks covered by the market risk management；

　　5. the adequacy and reliability of the market risk management information system， the accuracy and completeness of the market risk position data， and the consistency， timeliness， reliability and independence of the data sources；

　　6. the reasonableness and stability of the parameters and assumptions used by the market risk management system；

　　7. the appropriateness of market risk measurement methods and the accuracy of measurement results；

　　8. the compliance with market risk management policies and procedures；

　　9. the effectiveness of market risk limit management；

　　10. the effectiveness of the back testing and stress testing system；

　　11. the calculation and internal allocation of market risk capital； and

　　12. the investigation of major transactions in breach of limit， unauthorized transactions and failure in reconciliation of accounts.

　　Where a new product or new business with major impact on the market risk level is introduced， or where there is a major change or serious defect in its market risk management system， the commercial bank shall expand the scope， and increase the frequency， of internal audit of market risks.

　　The internal audit personnel of the commercial bank shall have the relevant professional knowledge and skills， have undergone the relevant training， and be able to fully understand the methods and procedures for identifying， measuring， monitoring and controlling market risks.

　　Article 31　Commercial banks with inadequate internal audit capability shall appoint a social intermediary institution to carry out audit on the nature and levels of marke

t risks and the market risk management system.

　　The CBRC also encourages other commercial banks to appoint social intermediary institution to carry out audit on the nature and level of market risks， and the market risk management system regularly.

　　Section Five　Market Risk Capital

　　Article 32　Commercial banks shall allocate adequate capital for the market risks they bear in accordance with the requirements of the CBRC on the administration of capital adequacy ratio of commercial banks.

　　The CBRC encourages commercial banks with relatively complex businesses and relatively high level of market risks to apply the rate of risk-adjusted returns to internal capital allocation and performance appraisal， and to achieve a proper balance between market risk level and profitability level throughout the bank and across all business operation departments.

　　PART THREE　MARKET RISK REGULATION

　　Article 33　Commercial banks shall submit to the CBRC financial and accounting statements， statistical reports and other reports relating to market risks as required. If a social intermediary institution is appointed to carry out audit on the nature and level of market risks and market risk management system， external audit reports shall also be submitted.

　　The market risk management policies and procedures of commercial banks shall be reported to the CBRC for record filing.

　　Article 34　Commercial banks shall timely report the following to the CBRC：

　　1. incurring of any heavy loss in excess of the market risk limit internally set by the bank；

　　2. impact on the market risk level of the bank and management conditions resulting from a major event in the domestic or international financial market that causes significant market volatility；

　　3. illegal acts in trading business； and

　　4. other major unexpected incidents.

　　Commercial banks shall formulate a market risk major event reporting system and report the same to the CBRC.

　　Article 35　The CBRC shall conduct on-site examination of the market risk management conditions of commercial banks regularly. The main particulars of such examination shall be：

　　1. the performance of duties of market risk management by the board of directors and the senior management；

　　2. the adequacy and implementation of market risk management policies and procedures；

　　3. the effectiveness in the identification， measurement， monitoring and control of market risks；

　　4. the reasonableness and stability of the assumptions and parameters used in the market risk management system；

　　5. the effectiveness of the market risk management system；

　　6. the effectiveness of market risk limit management；

　　7. the effectiveness of internal control of market risk；

　　8. the independence， accuracy and reliability of the bank‘s internal reports on market risks， and truthfulness and accuracy of the statements and reports relating to market risks submitted to CBRC；

　　9. the adequacy of market risk capital；

　　10. the professional knowledge and skills of the personnel in charge of market risk management and the performance of their duties； and

　　11. other matters regarding market risk management.

　　Article 36　In regard to issues of market risk management identified by the CBRC during regulation， a commercial bank shall submit a remedial proposal and adopt remedial measures within the stipulated time limit. The CBRC may give remedial proposals regarding the market risk management system of a commercial bank， including proposals for adjusting the methods， models， assumptions and parameters for measuring market risks.

　　Where a commercial bank fails to effectively adopt remedial measures within the stipulated time limit or whose market risk management system has serious defects， the CBRC has the right to adopt the following measu

res：

　　1. require the commercial bank to increase the frequency of submission of market risk reports；

　　2. require the commercial bank to provide additional related information；

　　3. require the commercial bank to appropriately reduce its market risk level through adjustment of asset portfolio and other means； and

　　4. relevant measures specified in the PRC， Banking Regulation Law and other laws， administrative regulations and departmental rules.

　　Article 37　Commercial banks shall disclose the quantitative and qualitative information of its market risk profile in accordance with the provisions of the CBRC on information disclosure. The information to be disclosed shall at least include the following：

　　1. the types and the overall level of market risks borne， and the position and level of each type of market risks；

　　2. the sensitivity analysis of the relevant market prices， such as impact of change in interest rates or exchange rates on the bank‘s returns， economic value or financial conditions；

　　3. the market risk management policies and procedures， including the general philosophy， policies， procedures and methods of risk management， the organizational structure of risk management， the market risk measurement methods and the parameters and assumptions used therein， the particulars of back testing and stress testing， and the methods of market risk control；

　　4. the status of market risk capital； and

　　5. a commercial bank that adopts internal models shall disclose the types and scopes of market risks calculated， the levels of overall market risk and different types of market risks calculated， the maximum， minimum， average and end-of-period values at risk during the reporting period， as well as the modelling techniques used， the parameters and assumptions used therein， the particulars of back testing and stress testing and the internal procedures for testing model accuracy.

　　PART FOUR　SUPPLEMENTARY PROVISIONS

　　Article 38　Other financial institutions such as policy banks， financial asset management companies， urban credit cooperatives， rural credit cooperatives， trust and investment companies， finance companies， finance leasing companies， automobile finance companies and postal savings institutions shall refer to these Guidelines.

　　Article 39　For State-owned commercial banks that have no board of directors， the management duties imposed by these Guidelines on the board of directors with respect to market risk management shall be performed by the business decision making organ.

　　Article 40　Foreign bank branches established in the People‘s Republic of China shall regularly submit market risk management reports to their head office pursuant to the market risk management policies and procedures formulated by their head office， and shall submit the relevant reports on market risks to the CBRC as required.

　　Article 41　An explanation of the terms specified in these Guidelines is provided in the Appendix of these Guidelines.

　　Article 42　The requirements of these Guidelines shall be satisfied no later than the end of 2007 in the case of State-owned commercial banks and commercial banks limited by shares， and no later than the end of 2008 in the case of urban commercial banks and other com

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