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Studies On Credit Risk Measurement Management Of Banks In China Under The New Basel Capital Accord

Posted on:2006-01-06Degree:MasterType:Thesis
Country:ChinaCandidate:L ShiFull Text:PDF
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Because of the influence from the unexpectable factors, difference between the real return and expected return will occurs during the operations of the commercial banks. Risk of commercial bank is the possibility of losing money or getting additional bonus. The risk is born with the commercial banks. Credit risk, current risk and interest risk are traditional risks to the commercial banks. During all of the above, credit risk is the oldest one in the financial area; it goes with the whole operation procedure of the commercial bank. In terms of the potential losing possibility, credit risk is the major risk to commercial banks. Measurement of this risk is important to commercial banks.The credit rating is beginning of the measurement and is bounded tightly with the credit risk measurement. To measure the risk of their capital, bankers have to rate capital, and give the risk proportion to specified capital. The credit rating can be divided into two genera] parts: the first one is the external rating from the public institutions; the other is the internal rating based (IRB) approach. It is very important domestic commercial bankers to build up and improve their loan rating and debt rating system. The New Basel Capital Accord, which will be implemented in 2006, is the basic guide to this task. The kernel of this Accord is the IRB. The Basel Committee allows commercial bankers with mature management to apply IRB to valuate the capital adequacy framework, therefore, relate the capital adequacy with the risks tightly. In another words, the Basel Committee has permitted and encouraged commercial bankers to adopted IRB.This thesis devoted to the following aspects:1. Analyzing risk measurements' necessity and feasibility to commercial banks instructed by New Basel Capital Accord;2. Gathering newest data form domestic banks and listed companies, and calculating KMV's result.3. Summing up and analyzing overseas banks' internal risk management andcontrol methods4. Correcting mistakes in KMV's expressions quoted in reference books(p50).This thesis is divided into six chapters. The first chapter is exordium .The second chapter is an overview of the general credit risks theories. This chapter emphasizedthat today's risks consist of client's direct breach of faith and the investment's potential risk from the client's breach possibility. This chapter also explains the four kinds of credit risk measurement model; these are Credit Metrics model, KMV model, Credit Risk+ model and Credit Portfolio View model. This chapter establishes the theory basis for the whole thesis. The third chapter explains the influence to domestic commercial banker brought by The New Basel Capital Accord as the "common game rules" for the global banks' risks management. This chapter focuses on the main contents and the two kinds of credit risk measurement— Standardized Approach and IRB, and analyses these two approaches. The fourth chapter discusses the advantages, history and problems of the valuation of the risks in detail. This chapter gives an introduction to the next chapter. The fifth chapter introduces the IRB system adopted by the oversea bank, and the referential methods that can be learned by domestic banks. The sixth chapter is the keystone of this thesis. It is very important for domestic commercial bankers to build up and improve their loan rating and debt rating system. To be adapted to The New Basel Capital Accord in 2006, it is the inevitable choice to establish the IRB for risks' valuation management. At first, this chapter tells how to build up the operation basis for the IRB system, then, this chapter shows steps and methods to finish IRB system. It emphasizes that the IRB is a complex rating system. The system covers rating of the clients and the transactions. At last, this chapter point out that carrying out KMV model in domestic commercial banker is viable.
Keywords/Search Tags:credit risk, credit risk measurement, The New Basel Capital Accord, Internal Ratings-Based Approach
PDF Full Text Request
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