Study On Credit Risk Measurement Models And Their Application For Banking Of China

Credit risk is one of the most important risk with which China business banks are fronted, which impacts not only operation and development of China business banks but also China economy development and society stable. China has entered WTO, which brings out increasing violent competition in China business banks. So, it is urgent for business banks to strengthen credit risk management. The reform of finance system and banks in China are later than outsides. The study on risk measurement and management are less. The methods and means of monitor on banks lag requirement. So, the dissertation has a certain theoretic purpose. China has entered WTO, which fastens combine Chinese business operation management with the world finance and urges us to learn outsides credit risk measurement and management. It is necessary to develop theory and methods of credit risk measurement and management based on actual circumstances in China. So, the dissertation has a certain practical purpose. Under the guide of "Basel New Capital Accord"and with use of combine with standard and empirical study methods, the paper gives theoretic analysis and empirical study on relatively famous current credit risk measurement models, with the foundation and actual circumstances in China, the paper gives preliminary study on how to apply the models and to strengthen credit risk management in China. On the foundation of empirical study on current credit risk measurement models, the author illustrates that the forecast of loan loss proportions of the majority models are more than actual proportion of economic capital for China bank loans(8.24%), which is more than the proportion required by Bale Committee(8%) and that the default possibility of Chinese enterprises are more than what Basel Committee suggests. The empirical study indicates that the forecast of Credit Risk Plus is the most appropriate to the actual value, and other models have less available for China business banks. The models have many hypotheses, which gives credit data rigorous requirement, and their forecast outcome are different from the actual value under the less credit data. So, We can't copy the models for China but establish new models available for China business banks reference the models developed by the West. It is very necessary for Chinese business banks to establish and better inner rating system according to "Basel New Capital Accord", the main of which is to establish own credit risk measurement model and method with more quantity analysis, however, the author will continue to the study in future owing to currently limitted study ability. Finally, based on the former analysis and study and with actual circumstance of credit risk management in China, the paper puts some suggestions on strengthening China business banks credit risk management system such as establishing information collection and process system, establishing and bettering rating data, establishing specialized evaluation agency, improving credit risk measurement and management technique, bettering inner rating system.