Study On The Early-Warning Mechanism Of Credit Risk In Commercial Bank

It is very useful to avoid explosion of banking credit crisis that an Early-Warning system of risks in commercial bank should be established. Moreover, it is instructive for promoting the theory to study on banking credit risk management. And the Early-Warning Mechanism of Credit Risk is important to make commercial bank stronger against risks. Based on the defining risk, banking risk, and banking credit risk, this paper summarizes the theory of banking credit risk management, and points out that an Early-Warning system is the first stage of banking management system, which comprises risk recognition and risk measurement. The risk managemen model of our country is on concentration, which is less than scattering. This paper analyses the fundamental reason of banking credit risk with Principal-Agent theory, and the special reasons with the history and the current situation of China. The core of this paper is studying on how to build an Early-Warning system of risks in commercial bank, which includes technical knowledge, building system, positive analysis and preventing risks. Firstly, it summarizes the principles of risk recognition and risk measurement. Secondly, based on the analysis of all technologes, actuality of our commercial banks, and expected management model, index system is established to reflect the capacity of paying debts, then Principal Components and Neural Network are selected to risk recognition, CreditMetrics model and CVaR to risk measurement. Thirdly, positive analysis of risk recognition system is completed with real data, index system and MatLab program, and that of risk measurement system with cases and Cplex program. Therefore, the better Early-Warning system of risks is concluded. Finally, this paper gives some political advice aiming at preventing risks and supplying some methods and ideas for works, combining the reasons and Early-Warning system of risks in commercial bank that have been achieved.