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Internal control is a self-regulatory behavior of financial institutions , commercial banks, internal control mechanisms are examined for their own businesses as a way of internal oversight , according to prudent commercial banks to guarantee the safe and effective management is very necessary and important to effectively prevent operational risks one of the ways . Commercial banks have sound internal control mechanism , both regulators premise of effective supervision , but also the regulatory authorities in one of the elements . According to the new Basel " Core Principles " requirements, banks should have their business to match the scale and degree of responsibility of internal control should include a clearly defined mandate and responsibilities , bank commitments , payments and accounting treatment of assets and liabilities the separation of functions , cross-checking of the program , asset protection , improve independent internal audit, inspection of the control functions and related laws , regulatory compliance functions . China's banking regulatory body should be of commercial banks improve the internal control system put forward a standardized rules requirements, develop a certain standard , requiring all banks regardless of their size , should be based on its balance-sheet and off-balance sheet business, the nature , complexity and degree of risk management to establish an effective internal control system, which must be based on the bank 's operating environment and changes in operating conditions and make the appropriate response and regulate the banks to implement the oversight mechanisms. At the same time , the legal system in the regulatory risk , should draw new " core principles " of the relevant provisions of the regulatory body should be clearly regulated commercial banks to implement the effectiveness of internal control mechanism or not . Regulatory authorities must be satisfied that : commercial banks to establish on capital adequacy, credit risk, market risk , liquidity risk , operational risk, interest rate risk and other content bank account 's risk management policies and procedures.

New agreements have an important regulatory philosophy , that is incentive compatible . The so-called incentive-compatible financial regulation , the emphasis is not just financial regulation starting from the regulatory objectives set regulatory measures , but should refer to the financial institution 's business objectives , internal management of financial institutions and market discipline into the regulatory scope of this guide two forces to support the regulatory goals. Based solely on the regulatory objectives , without regard to the interests and development of financial institutions supervision , supervision of incentive incompatibility is the basic features . Incentive incompatibility regulation, must compel commercial banks to pay a huge cost of regulatory compliance , loss of profit opportunities to open up new markets , and often have serious moral hazard problem . Regulatory agencies because it is not timely manner to the changing needs of the financial markets to make a timely response to a financial institution disincentive to innovation . Therefore, the development of the global financial regulatory framework has been increasingly focused on incentive compatibility , emph