| Since 90's in last century, under the background of highly developed financial market and more complicated risks status, along with deeper understanding for risk management and capital management in commercial banks, a new management system which takes economic capital as the core has been established gradually, and been used widely among international advanced banks.Economic capital management embodies the new concept of modern commercial bank's value management; fairly solves the problem of how to balance the risk and profit; gives full play to capital's fonctions of withsatanding risks and creating value. It becomes the common language of commercial banks in the world gradually. Recently, some domestic commercial banks begin to introduce the concept of economic capital management, and try to explore how to carry it out thoroughly. China Banking Regulatory Commission also encourages our commercial banks to build up economic capital management and assessment system based on economic capital. The implementation of economic capital management is not only a great reform of the interal management in our commercial banks, but also an important transition in system for satisfying the needs of outside supervision. It has great strategic significance not only towards improving the level of risk management in commercial bank, but also towards pushing on with China finanicial reforming work.This paper analyses the theoretical significances, practical values and pressing properties of carrying out economic capital management in modern commercial bank. It expounds the inside essential characters and internal rules of economic capital management. The paper mainly researches how to establish economic capital management system which uses capital to withstand risks and aimes at improving shareholders' value from dual-dimensional of technical models and practice management. The author tries to relate the concept of economic capital management to financial practice, and makes the concept operational. The paper breaks through former partial analysis, researches overall and systematically on economic capital management including economic capital's measurement, allocation and evaluation, integrating risk, capital and value into a coherent whole. The paper also analyses the features and problems of domestic commercial bank's economic capital management. Based on the advanced experience of foreign commercial banks, the author tries to establish a complete set of economic capital management system which not only accords with the status of our commercial banks, but also joints with the international criteria of risk and capital supervision. It is good to the realization of specialization and internationalization for our commercial banks. The study includes following six chapters:The first chapter is the introduction. It outlines the study background, study significance, the structure of paper and probable innovations. Chapter 2 advances that economic capital management is a dynamic management system, including economic capital measurement, allocation and performance estimation, it aimed at the maximization of shareholders' value. Chapter 3 involves two ways to estimate economic capital, from top to down and the converse, they can collate each other. It also discusses how to identify economic capital based on credit risk, market risk and operation risk respectively. Chapter 4 creates a model of economic capital allocation based on RAROC. It's a majorization arrangement for economic capital allocation under dual-ristrictions of risk and profit. Then the author builds a performance measurement system based on economic capital, it takes the EVA as the core. Chapter 5 compares the practical experiences of foreign advanced banks, and through case studying to analyse the economic capital management in domestic commercial bank, research on how to aplly and how to improve it. Chapter 6 tries to provide a complete set of policy advices to improve our economic capital management system during the transitional time.
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