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Research On Integrated Risk Management Of Commercial Banks In China

Posted on:2011-10-24Degree:DoctorType:Dissertation
Country:ChinaCandidate:H M LiFull Text:PDF
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Along with the development of modern commercial banks, the business types of bank become more and more diversified and complex. Various businesses of commercial banks go cross each other. Commercial banks are not faced with one kind of risk, but a collection of credit risk, market risk, operational risk and so on. These risks have a strong pertinence relation. Under the traditional risk management mode, the risk management department of commercial banks will manage above risks separately. This kind of risk management mode will ignore the pertinence relation of the risks. Risk added up simply will cause the overvaluation of whole risk and the waste of human and material resources. The efficient allocation of resourses will not be achieved. Therefore, the commercial banks should carry out integrated risk management considering the pertinence relation of these risks.Baselâ…¡coming into force in April 2004 and Enterprise Risk Management-Integrated Framework issued by COSO in July 2004 proposed to manage credit risk, market risk and operational risk together for the modern commercial banks. Commercial banks should value the whole risks of assets or portfolio with a uniform standard and control the whole risks considering the pertinence relations between them. Based on the theoretical and realistic background of modern commercial banks this dissertation put forward the conception of integrated risk management for Chinese commercial banks.According to the structure, this dissertation is composed of the preface and three main sections of the dissertation.In the preface, the dissertation first illustrates the background, purpose and significance of this research. Meanwhile, the dissertation also reviews and remarks the domestic and international academic researches in this field. Based on the above research, the dissertation further introduce the research methods, basic framework as well as the main innovations of this dissertation and difficulties I come across.Chapter 2 of the dissertation is the first section. The dissertation defines the connotation and foundational theory of integrated risk management of commercial banks, and emphasizes the transform of risk management mode in this section. First, the dissertation gives the definition of integrated risk in an uncertainty economics analysis framework through a comparison of integrated risk and other interrelated concepts. In addition, the dissertation also expounds the development trend of commercial banks from traditional single risk management to the modern integrated risk management in this section. In the end of this section, the dissertation discusses the necessity of integrated risk management for commercial banks.The second section of the dissertation is composed of Chapter 3,4,5,6. The dissertation mainly illustrate the specific flow of integrated risk for commercial banks and put forward the integrated risk management framework based on the recognition, measurement, warning and prevention of integrated risk in this section. In the integrated risk recognition, the dissertation uses risk graph to assess preliminary integrated risk. For the measurement of the integrated risk, this dissertation holds that we should use the connecting fuction (Copula function) integrating the credit risk, market risk and operational risk. The dissertation also does some empirical analysis on one Chinese commercial bank. Due to the limitation of the data and the non-availibility of the relative technology, the dissertation only integrates the market risk and credit risk of commercial banks. I use t-GARCH (1,1) model to describe the marginal distribution of market risk and Weibull distribution function with three parameters to describe the marginal distribution of credit risk. The VaR of this commercial bank's integrated risk is calculated by Gaussian Copula function and Gumbel Copula function. This result obviously indicates the integrated risk will be overestimated if these risks are added together simply. This result illustrate sufficiently that these risks have pertinence relation.In the warning section, the dissertation mainly use fuzzy comprehensive appraisal model to construct a warning system of integrated risk for commercial banks. In the course of filtering the pertinent risk indexes, the dissertation uses clustering analysis to eliminate those indexes with strong pertinency and establish the matrix of integrated risk membership. The dissertation also uses objective principal component analysis method to fix the weights of all risks and gets the risk warning factors for commercial banks. Then this model is applied to some Chinese commercial banks and the result shows that the risk management consciousness of Chinese commercial banks is improving gradually. Chinese commercial banks have paid more attention to the quantitative approach during risk management especially after Baselâ…¡. The achievements of the reform are obvious and the integrated risk of these commercial banks is light. In the end of this section, based on the setting forth of the measures of integreted risk internal control and external prevention, this dissertation puts forward some ways for commercial banks to prevent and solve the integreted risk.The third section of this dissertation is composed of Chapter 7 and 8. The integrated risk management system of Chinese commercial banks is built through the integrated risk recognition, warning, measurement and prevention in Chapter 7. In detail, the integrated risk management of commercial banks in China should set risk management concept proposed by Baselâ…¡as precondition and be based on the healthy integrated risk management culture. Commercial banks should improve the information system as soon as possible, establish a more comprehensive and open risk database, and improve the technology level of measuring integrated risk. The integrated risk management of commercial banks should be expanded with technological innovation and person dispositional promotion. Chinese commercial banks should strengthen the training of risk management talents. At the same time, we should continue to consolidate and deepen the achievement of commercial banking system reforms, promote the improvement of governance structure, and establish effective incentive and internal control mechanism of integrated risk management. Commercial banks should establish the mechanism of integrated risk information handling and periodical reports, improve the supervision mechanism of the integrated risk management, and then form a strong institutional guarantee of commercial banks integrated risk management. At last Chapter 8 draws the conclusion on the research and discusses about further study.
Keywords/Search Tags:Commercial Banks, Integrated Risk, Measurement of Risk, Copula Function, Prevention of Risk
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