| The financial crisis has emerged with the birth of the term finance. The Western countries have experienced hundreds of large and small types of financial crisis during a few hundred years. But with financial globalization intensified in recent years, the financial crisis enveloped in almost all of the major countries in the world. In early 2007, the U. S. subprime crisis gradually emerges, and almost all of the world’s major developed economies have been hit. Domestically, because of the presence of exchange controls and interest rate controls, the global financial crisis has not yet affected the domestic real economy and the financial system. But after the completion of market interest rates, commercial banks will directly face the market withstanding the test of various risks. The Basel Ⅲ was born in a special moment, and was placed high hopes on. Domestic financial regulators already have a sense of crisis. On the one hand they are trying to put the country’s financial regulation into the international financial regulatory system, such as the active implementation of the Basel Ⅲ; on the other hand, regulators have carefully studied the actual situation in China and carry out supervision in view of the characteristics of the domestic financial system. Therefore, the construction of the IRB emerges in response to the condition of the internationalization of commercial banks and the requirements of regulatory. And more importantly, the construction of IRB has close relation with the intrinsic motivation of commercial banks.As a huge project, IRB is impossible to be covered in one research paper. Therefore, this article will focus on the key points of the study of credit risk measurement model on PD. Meanwhile, the study will be limited on corporate loans in RMB. Also, we can leave some of the expansion of the model, providing a larger space for further study. Ultimately, our econometric model of PD will be able to meet the relevant requirements of the Basel agreement, and also be in accordance with the relevant provisions of "commercial bank’s capital management approach" released by CBRC. More importantly, the model will give out the accurate PD, which will help commercial banks to control the risk of default in the future. More far-reaching significance is that commercial banks can apply the model to the daily business activities of risk management, pricing, appraisal, asset-liability management, etc. As a result, the competitiveness of commercial banks will increase dramatically.First, the author gives out a review on the relevant research literature about the Basel Ⅲ and various credit risk measurement models. Then the theoretical analysis and empirical testing about the more common credit risk measurement models are given out, in order to generalize their advantages and disadvantages. Secondly, according to the difficulty of the domestic commercial banks’ PD model, the author proposes the independent modeling principles and the overall framework of the model: use the binary data model to solve the classification problem; use the Logistic Model to solve the autocorrelation of parameters; establish macroeconomic auxiliary model to adjust the probability of default for each period of economic; use cluster analysis method to form a distribution under different probability of default rating; combine the Logistic Model and the subjective scoring method to make the integration of the measurement results more in line with the actual situation. Finally, the article makes an empirical analysis of the model and has given out 10 kinds of PD ratings and the corresponding intervals to describe their risk characteristics. Meanwhile, the model is tested by a number of indicators, which meet the requirements of regulatory authorities. At the end of the article, the author gives a conclusion and further prospects.There are three major innovations in the article, including:(1) presenting a suitable framework of Chinese commercial banks’PD model; (2) combining the theory with the practice; (3) proposing a method to measure PD in the framework of the Basel Agreement. But the article also has four deficiencies, including:(1) the assessment of models have limitations; (2) the correction of macroeconomic cycle factors is limited; (3) effective stress testing of the model has not been done; (4) the model only focuses on the PD, and has not be extended to measure other risk indicators. On the basis of this article, the future researchers can adopt a more advanced metering tool to expand the scope of the study to the entire credit risk measurement field, and even research out of the regulatory framework of the Basel agreement.
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