The Evolution Of Basel Ⅱ And Its' Implementation In China After Sub-prime Mortgage Crisis

The whole world has been paying close attention to the continued turmoil of global economy and financial market which is triggered by sub-prime mortgage crisis. Meanwhile, the major countries and organizations start their implement of Baselâ…¡. Basel II becomes people's focus under the coupling of these two events. Baselâ…¡is based on the risk management experience of international banks. However, many of these banks, such as Citibank, UBS, etc, suffered huge economic losses instead of become the backbone to withstand the sub-prime mortgage crisis. So one point is whether the system of Baselâ…¡is reasonable and effective. Based on the theory of bank supervision, I represent the evolution process of Basel II systematically and analyze the causes of sub-prime mortgage crisis and its effects on Basel. Instead of denying Basel II, it is becoming more important to implement Baselâ…¡comprehensively. Many improvements are put forward about Basel II by the Basel Commission. It is expected that the relate tests will be completed and Basel II will launch by 2010.At that time, Chinese banking and international banks will stand at the same starting line in the implementation of Baselâ…¡. The problems of China's banking are not only the unprofessional measurement of capital and low capital adequacy ratio, but the ambiguity of capital's nature and function. In the implement of Basel II, on one hand, we have to respect its basic principles and spirit; on the other hand, we should combine it with China's national conditions and pay attention to the appropriate institution building. Advanced technology in the sound system can play its due role which is the new Capital Accord of the basic spirit and principles of lies.The IRB is analyzed in the study.81 financial indicators are selected from the 1093 samples of listed manufacturing companies at the end of 2008. Using principal component analysis,5 composite factor are selected as independent VARiables and based on it we establish the Logit Model. The empirical results show that the model's overall accuracy was 91.6%, the prediction of non-default rate of 98.6% and the prediction of default was 34.6%. This paper includes seven chapters. The first chapter is introduction and Chapter VII is the conclusion and outlook. From the second to the sixth chapter is the main parts of this study, focusing on the following aspects:the theoretical basis of banking supervision, including its cost-benefit analysis and the monitoring goals; representation of the evolution of banking supervision system and Basel, analyzing the framework of Basel II comparing with Basel I and its improvements; the analysis on the causes of sub-prime mortgage crisis, the systematic flaws of Basel II and its improvement after sub-prime mortgage crisis; introduction of the enlightenment from implements of Basel II in UK, Australia and Hon Kong, policy recommendations for China's carrying out Basel II; and the empirical study of credit risk capital measurement based on the sample of 1093 manufacturing sector listed firms by the end of 2008.