The Study On The Country Risk Assessment And Control Based On Bank

With the deepening of reform and opening up,as well as the rise of its economy,China is extending further connections to the world economy,and playing an increasing active role to integrate into the global economic development.Particularly,since the Twelfth Five-Year Plan Period,China has speeded up the implementation of Go Global Strategy,which greatly promoted domestic enterprises to make overseas investment,and rapidly increased the demand for cross-border financial services.All these achievements have brought new opportunities for banks on their global business exploration and the internationalization process.However,when Chinese banks go overseas and develop their businesses on a global scale,they will inevitably encounter with many risks;such as the country risk,etc.In fact,along with the economic globalization,financial integration,and the competition of world political strengths,the global country risk has been growing more than ever.For example,during the Latin American Debt Crisis of 1990s,many banks with Argentina businesses suffered huge losses.In the Asian Financial Crisis of 1997,a large number of foreign-invested enterprises collapsed,and the banks also absorbed great damages.Since 2008,the outbreak of a series of crises,such us the US Subprime Mortgage Crisis and the European Sovereign Debt Crisis,has dragged the global economy into recession.Recently,there have been unceasing regional conflicts,like turmoil in the Middle East and North Africa,Ukraine Coups,and frequent unrest in Southeast Asia.In addition,some unfair judgments announced by some risk assessment institutions in relative countries,not only failed to make effective warning of national risk,but further escalated the country risk globally.Also,the security for Cross-border banking business is quite weak and worrying.If Chinese banks could not effectively assess and manage these risks in the process of overseas expansions,these issues will pose great threats to banks' own assets,and seriously affect the realization of China's Strategy of Opening up Economy.In this regard,this study has considerable theoretical and practical significance.Taking the essence from limited outcomes of previous studies,this paper made comprehensive study of the theory of country risk from its origin,connotation and denotation,evaluation methods,and defined the mechanism of country risk.Based on the above researches,from 2 key concerns of credit security in banking,namely paying willingness and paying capacity,this study classified the country risk into political risk and economic risk,and established the bank's internal country risk assessment models by using the Analytic Hierarchy Process and Principal Component Analysis as the most applicable analysis methods respectively,and conducted validation checks accordingly.Then,it analyzed the country risk assessment in extreme cases and abnormal losses by theoretical and empirical methods.Finally,this paper suggested some measures,including the comprehensive risk management,credit scale control,early warning and monitoring,so as to control the country risk in the international credit business of the banks.The main structure,content,and research ideas of this article are as follows:Chapter 1 is Introduction.This chapter proposed the main issue discussed in this article.It introduced the background,significance,ideas and methods of the research,and outlined a research framework of the paper.Chapter 2 is Country Risk Identification:Mechanism and Characteristics.This chapter constituted the basic theoretical foundation of this paper.It presented completed and in-depth illustrations on the origin and development,connotation and denotation of country risk,characteristics of country risk in the post-crisis era,which paved way for further research.Chapter 3 is Country Risk Assessment:Methodology.By comparative analysis,it studied a variety of instruments used for country risk assessment,as well as the methodologies and features of relevant world-renowned rating agencies in their national risk assessment,providing methodological basis for country risk model.Chapter 4 is Country Risk Assessment:political risk model for banks'international credit business.Based on the country's political risk profile,this chapter selected 8 indicators to form a national political risk assessment index system.Then,it set the weight for each index by Analytic Hierarchy Process in combination with qualitative and quantitative methods,indicated the corresponding evaluation standards,and set up the political risk model for banks' international credit business.Chapter 5 is Country Risk Assessment:economic risk model for banks'international credit business.Based on the country's economic risk profile,this chapter selected 11 indicators to form a national economic risk assessment index system.Considering the potential multicollinearity problem,and the quantification of each index,it adopted the quantitative method of principal component analysis,and set up the economic risk model for banks' international credit business.Chapter 6 is Country Risk Assessment:Comprehensive Evaluation and Validity Check--empirical evidence from Thailand.In order to obtain the comprehensive score of country risk,this chapter first set the weight of political risk score and economic risk score.Then,it took the example of Thailand during the Asian Financial Crisis,picked Thailand's data from 1994 to 2003,and applied the model established in this article to evaluate the movement features of Thailand's country risk in the past 10 years.Afterwards,the effectiveness of the model was validated in combination with the historical records in Thailand.Chapter 7 is Country Risk Assessment:Measurement of Stress Losses in Banks'International Credit Business--empirical evidence from Kazakhstan.This chapter built a country risk expected loss model for banks' international credit business.Then,it took example of Kazakhstan to conduct a stress test,and calculated banks' losses for loans to Kazakhstan under different stress scenarios.Chapter 8 is Country Risk Control:Suggestions for Banks' International Credit Business.This chapter proposed to include country risk into the comprehensive risk management framework,and discussed some controlling methods of country risk from the national venture capital management,scale control,pricing management,early warning and monitoring,risk transfer and mitigation,etc.Chapter 9 is Conclusions and Expectation.This chapter summarized the main conclusions of this paper,and put forward some orientations for future research.