The Reform On Credit Risk Management Of China Commercial Banks And IRB Approaches For Reference

In June 2004, the Basel Committee on Banking Supervision (the Committee) formally released the New Basel Capital Accord. Comparing to the 1988 Capital Accord, the revisions of New Accord exhibits on three dimensions: first, founded a more suitable supervision framework; second, the definition of risk has been extended from credit risk only to credit risk market risk and operational risk; thirdly, One of the most innovative aspects of the New Accord is the Internal ratings-based (IRB) approach to credit risk, which includes two variants: a foundation version and an advanced version.The risk management of foreign banks has experienced several decades, which has been accumulated rich advanced opinions and methods and emphasizes on these principles: All-round range of risk management; Global mechanism of risk management; Full-out course of risk management; Universal culture of risk management; Brand-new methods on risk management. Thinking of quantitative technologies of financial risk management, international financial organizations have progressed such new methods as BASELII,VAR, RAROC, KMV, CREDIT METRICS etc. Grasping and imbibing these ideas means important for improving the level of our banking risk management.The New Accord reflects nowadays advanced risk management technologies and supervision practices. The core content of the New Accord is to prove the level of risk management, viz., identifying measuring and controlling risk well and truly, insisting on the supervision tactic which emphasizes on risk and paying more attention to credit risk management and advancing more request on evaluation and control of commercial banks' credit risk.In nearly years, our banking have accumulated some experiences on management of credit risk, but compared with foreign advanced commercial banks, there are a large degree of gap, which specifically behaves: 1.Thoughts on management of credit risk are backward. 2.System of credit risk management is not accomplished. 3.The credit risk trends to be concentrated. 4.Having not founded perfect data information system, the base of credit risk management is frangible. 5.Batching methods and running technologies are underdeveloped and 6.Social credit system is not well and sound.According to experience of international advanced commercial banks and bonding trait and request of China commercial banks, we must make innovations to improve risk management:(l)Founding all-around system of risk management; (2)Establishing appropriatesystem of IRB which should be suitable to our country; (3)Using foreign advanced management model and methods for reference .carrying through the assets combination and adjustment, searching after and developing credit derivatives;(4)Strengthening social credit institution and nurturing banking internal credit culture and (5)Reinforcing external supervision and intensifying information disclosure.At the same time, we should introduce foreign advanced ideas step by step, set up to found uniform credit system, and notice to defend risk on credit-derive-tools.