On December 29, the State Administration of Financial Supervision reported that the bureau revised and issued the "Measures for the Management of Operational Risks of Banking and Insurance Institutions". The Measures will come into force on 1 July 2024. The Measures include clarifying risk governance and management responsibilities, stipulating basic requirements for risk management, refining management processes and management tools, and improving supervision and management responsibilities. At the same time, differentiated supervision was carried out according to different situations, and a transition period was set.
State Administration of Financial Regulation**Clarify requirements such as operational risk identification and assessment"Operational risk is one of the main risks faced by banking and insurance institutions in their operation and management. The person in charge of the relevant department of the State Administration of Financial Supervision and Administration said in response to reporters' questions on the "Measures" that in recent years, the situation of operational risk prevention and control has become more complex, and the original regulatory provisions are difficult to meet the practical needs of risk management, and the international rules related to operational risk management have also been revised and improved, and it is necessary to comprehensively revise the original regulatory provisions in combination with China's practice. The Measures consist of six chapters and 52 articles and appendices, the main contents of which include:Clarify risk governance and management responsibilities. Clarify the responsibilities of the board of directors, supervisors (boards) and senior management, define the specific scope and responsibilities of the three lines of defense, and consolidate the operational risk management responsibilities of branches and subsidiaries.
Define the basic requirements for risk management. It is clarified that banking and insurance institutions shall establish a basic system for operational risk management, operational risk appetite and transmission mechanism, establish and improve the management information system for operational risk, and cultivate a good operational risk management culture.
Refine management processes and management tools. Banking and insurance institutions are required to manage the whole process of operational risks. It stipulates the basic requirements for operational risk control and mitigation measures such as internal control, business continuity management, network security, data security, and business outsourcing management, establishes a reporting mechanism for operational risk situations and major operational risk events, and applies three basic management tools and new tools, such as the operational risk loss database.
Improve supervision and management responsibilities. The State Administration of Financial Supervision and its dispatched agencies shall inspect and assess the soundness and effectiveness of the operational risk management system of banking and insurance institutions, and industry associations shall play a self-discipline and service role.
In the appendix to the Measures, the meaning of some provisions is explained and examples are given to facilitate the implementation of the provisions by banking and insurance institutions. Among them, Article 42 of the Measures clarifies the major operational risk events that banking and insurance institutions are required to report within 5 working days of becoming aware of them, and Article 44 clarifies the relevant penalties. 
The above-mentioned person in charge of the State Administration of Financial Supervision explained that the revised "Measures" are connected with the relevant requirements of the original China Banking and Insurance Regulatory Commission for operational risk management, and are matched with the just-issued "Measures for the Management of Capital of Commercial Banks". The Measures further clarify the requirements for the identification and assessment, management control and tools of operational risks of banking and insurance institutions, improve the operational risk governance framework of banking and insurance institutions, and better adapt to the current situation of prevention and control of operational risks. Implement differentiated supervisionAccording to the above-mentioned person in charge, the "Measures" integrate the operational risk supervision rules of the original banking institutions and insurance institutions, and clarify and unify the basic requirements applicable to banking and insurance institutions. At the same time, the Measures distinguish between banking institutions and insurance institutions, and between larger and smaller institutions, and apply differentiated regulatory requirements respectively. For example, it stipulates that insurance companies do not apply requirements such as risk measurement and capital withdrawal;A one-year transition period will be granted to larger insurance institutions in terms of implementing the operational risk management framework and responsibilities, as well as the basic requirements for risk managementClarify the implementation of insurance group (holding) companies, reinsurance companies, etc.;Encourage larger institutions to become more resilient;It is clarified that the second line of defense department of the first-level branch (provincial branch) of a smaller institution may be exempted from setting up a dedicated post or person for operational risk management, and will be given a two-year transition period for the implementation of the operational risk management structure and responsibilities and basic requirements for risk management. Set up a transition periodThe Measures will come into force on July 1, 2024to allow sufficient time for banking and insurance institutions to carry out implementation work. At the same time, the "Measures" distinguish between situations and carry out differentiated supervisionSet up a transition periodand fully solicited and adopted the opinions of various market entities. The person in charge said. The person in charge said that the promulgation of the "Measures" has improved the operational risk supervision system of China's banking and insurance institutions, which is conducive to making up for the shortcomings of the regulatory system, further consolidating the achievements of the battle to prevent and resolve financial risks, standardizing and improving the operational risk management level of banking and insurance institutions, and strengthening institutional supervision, behavior supervision, functional supervision, penetrating supervision, and continuous supervision. In the next step, we will further give full play to the self-discipline and service role of industry associations to help guide banking and insurance institutions to continuously improve the level of operational risk management. Editor: Zhang Zhixuan Producer: Li Ruoyu Signed: Ding Jianming.