Studies On Evaluation And Optimization Of Credit Risks Of Commercial Banks

Financial risks faced by Chinese commercial banks are mainly credit assets risks with underlying assets of credit loans. Commercial banks are so special enterprises that risks can spread to the any corner of the whole world through bank industries and their settlement systems. As mentioned above, this paper chooses financial risks faced by commercial banks as the key issue. First, we study risk conduct mechanism. In this paper, fives risk conduct mechanisms have been discussed, followed by empirical analysis of Asian financial crisis.Currently, developed countries adopt internal rating system as an effective management methodology, also because the new Basel Accord reemphasizes it. This paper proposes a multiple dynamic internal credit risk rating system that makes some improvements over the two-party credit rating system. Fussy integrated evaluation methodology is used to evaluate each risky factor which the proportion of each index can be calculated by fussy clustering method. Moreover, it proposes a novel adverse-offset methodology that is an effective way used to evaluate the non-quantity index. Compared to the traditional method it has six advantages. And in order to solve the problem that AAA rating system cannot show the differences between the loans in the same rating, this paper innovatively adopt the complex-label method.According to the new Basel Accord, an integrated internal bank rating system also includes the calculation of probability of default (PG), Loss at Given Default rate (LGD) and Exposure at Default (EAD). This paper theoretically analyzes three methods to calculate the probability of default with the classification of two categories of information. Here we discuss on two models under the two different rating philosophies, followed by analysis of their changes with the economy situation.However, in the asymmetric information market, borrowers having more private information than lenders, it easily leads to adverse selection, which limits some reciprocal transactions to be fulfilled. In some cases, borrowers with higher risk level are willing to pay higher interest to obtain the loan to invest in venture projects. While borrowers with higher risk level will enter that increases probability of default. It will lead to decline of expected profit if banks continue to increase interest rate. The market has probability to reach equilibrium only if competition of banks is respectively independent in the credit market and reach the Bertrand-Price. Moreover, parts of borrowers always cannot obtain the loan under any interest rate conditions, which is called credit ration.This paper builds up the objective function as minimization of unexpected loss of portfolios according to characters of commercial banks of China, which is on the basis of immune algorithm for amending optimal model. And empirical study is undertaken on some state-owned commercial bank, followed by the conclusion that new approach can put into practice effectively.