What are the four lines of defense in the operation of commercial banks?

Commercial banks have three lines of defense:

A line of defense: Whether it is the regulations of the regulatory authorities or the management practices of commercial banks, they will directly carry out business operations, and the front-line positions and institutions that provide products and services to customers will be the first "line of defense" at the forefront of internal control.

Through the establishment of a working mechanism for different positions in business institutions to perform their own duties, assume their own responsibilities and restrain each other, the "first line of defense" to control operational deviations by "self-restraint" and "incompatible job separation" has been formed. For example, the operation principles of "accounting vouchers, strict audit", "important business, authorization control" and other operating principles must be followed by the operation of counter business personnel.

Second line of defense: Due to the information asymmetry in the entrustment, the self-restraint and post constraints of the "first line of defense" may become a mere formality due to the collusion of insiders. To this end, commercial banks have also set up a "second line of defense" for internal control.

The "self-restraint" and "due diligence" control of various functional departments is the "second line of defense" of commercial banks.

Three lines of defense: Due to the characteristics of diversified operations and hierarchical organizational system of commercial banks, the multiple interests of various branches and departments coexist, and the problem of deviating from strategic objectives and overall objectives due to standardism is more likely to occur. Therefore, there is a need to supervise the self-discipline and due diligence of the functional departments.

2. The prevention and control objects of the three lines of defense:

The main prevention and control objects of the "three lines of defense" have also undergone two major evolutions from "case prevention" to "risk prevention" and then to "deviation prevention". In order to control the high incidence of cases, the People's Bank of China (PBoC) issued the Guiding Principles, which set out the requirements for the establishment of "three lines of defense", the main purpose of which is to prevent and control cases. With the development of risk management theory and practice, the object of prevention and control has gradually developed from "case prevention" to "risk prevention".

After the promulgation of the Basic Norms, the internal control of enterprises has been elevated to the level of national strategy, reflecting the great importance and profound consensus of the five ministries and commissions on internal control. As far as internal control is concerned, the "three lines of defense" are designed to prevent and control deviations between business management activities and established objectives. Of course, the bias here is logically consistent with risk in the broad sense.

Therefore, it can be said that the object of prevention and control of the "three lines of defense" of commercial banks is the deviation from the established objectives in the operation and management activities, especially the deviation of risk tolerance, which includes risks in the narrow sense, as well as fraud and cases.

In order to maintain good liquidity of assets, commercial banks have set up three lines of defense: the first line of defense is the cash in hand of commercial banks, which is a fully liquid asset that can meet the payment needs of customers at any time; The second line of defense is the highly liquid deposits or claims owned by commercial banks. For example, deposits in ** banks, deposits of interbank funds, etc., these are the assets that commercial banks can dispatch and dispose of at any time; The third line of defense is the highly liquid short-term valuable** held by commercial banks, such as commercial papers, bank acceptance bills, treasury bills, interbank short-term loans, etc.

These assets are generally available in the market quickly**, discounted or immediately recovered. Generally, the first line of defense and the second line of defense are referred to as the primary readiness of commercial banks, and the third line of defense is called the secondary readiness of commercial banks.

The three lines of defense for banks refer to the following three lines of defense:

1. The first line of defense of the business processing department and the main body of business processing behavior;

2. Implement the second line of defense with the risk management department, business management department and compliance department as the main body;

3. Create a third-party line of defense with the supervision department and audit as the main body.

1. Problems occur with the bank card itself, resulting in abnormal conditions in the bank card: because the bank card is carried with you for a long time, and the bank card itself is composed of various processing chips or magnetic stripe cards, which are affected by the strong magnetic field strength, resulting in the destruction of the processing chip or magnetic stripe card;

2. Personal operation is cautious, resulting in abnormal situation of bank card: in order to avoid the bank card being stolen and used by others, the bank has set a password that is wrongly logged in more than 3 times, and it will adopt the countermeasure of temporary freezing, which will be frozen for 24 hours under normal circumstances.

The three lines of defense of the bank refer to: first, the first line of defense is the business processing department and the business processing entity; The second is implementation to manage risks.

The department, business management department, and compliance department are the second line of defense; Finally, it is necessary to build a third line of defense with the supervision department and audit as the main body.

Different banks have different understandings of the three lines of defense, and for different lines of defense, it is necessary to combine banking business.

Development strategy, product innovation, business processes, and day-to-day management, clarifying the responsibilities of each line of defense and how to perform those responsibilities in the line of defense. If it is the three lines of defense for the bank's internal control, it is the deposit insurance system.

Preventive risk management as well as emergency rescue.

The three lines of defense are the supervision mechanism and internal checks and balances set up by commercial banks to prevent internal risks.

The third line of defense, because the bank's business has the characteristics of diversified operation and hierarchical organization, and the diversified interests of various branches and departments coexist, it is more likely that business management activities deviate from the strategy and overall goals due to departmentalism, so it is also necessary to supervise the self-discipline and due diligence supervision of functional departments.

Answer]: a, d

Risk management and compliance are the second line of defense. The Risk Management segment is responsible for supervising and evaluating the business activities of the business unit that assume risks. The compliance department is responsible for regularly monitoring the bank's implementation of laws, corporate governance rules, regulatory provisions, and bank chain norms.

Item C sedan car belongs to the first line of defense; The two items of be belong to the third line of defense.

Answer]: a, d

Risk management and compliance are the second line of defense. Among them, the risk management department is responsible for supervising and evaluating the business activities of the business unit that bear risks. The compliance department is responsible for regularly monitoring the bank's implementation of laws, corporate governance rules, regulatory provisions, and the rules of conduct and policies.

Item C belongs to the first line of defense of size pants; The two items of be belong to the third line of defense.

Answer]: The B business team is the "first line of defense" of risk management, responsible for identifying, evaluating, mitigating and monitoring the risks in their respective business areas, and has primary and direct responsibility for managing and controlling the risks assumed by their business activities.

Answer]: a, b, c

The "three lines of defense" refer to the three teams (or departments) formed within a commercial bank that assume the same responsibilities in risk management, namely, the business team, the risk management team, and the internal audit team.

The three lines of defense for risk management of commercial banks refer to the risk management of prevention sources, the macroscopic system of deposit insurance, and the emergency rescue system. These three lines of defense are mainly to protect against internal risks.

There are no clear regulatory requirements on how commercial banks should set up the "three lines of defense". However, deviations and deviations from the set objectives in various activities in operation and management are present at all times and everywhere, which may not only cause risks and losses, but may also lead to criminal cases and even lead to the bankruptcy of commercial banks.

China's Guidelines for Internal Control of Commercial Banks stipulate that the internal control of commercial banks shall follow the following basic principles:

1. Comprehensiveness.

The internal control of a bank should not only be carried out in a certain aspect, but should penetrate into all business processes and operational links of a commercial bank, covering all departments, positions and personnel. There can be no blind spots and blanks, and everything must be controlled.

2. Prudence.

Internal control should be based on risk prevention and prudent operation, and the operation and management of commercial banks, especially the establishment of new institutions or the opening of new businesses, should reflect the requirement of "internal control first".

3. Validity.

Internal control should have a high degree of authority and be truly implemented, and no one should have power that is not subject to internal control; Problems existing in internal control should be fed back and corrected in a timely manner.

4. Independence.

The inspection and evaluation department of internal control shall be independent of the department establishing and implementing internal control, and shall have direct reporting channels to the board of directors and senior management.