The Study On Economic Capital Management Of Commercial Bank

In the recent more than ten years' time, western banks have gradually formed a completely new risk management means—economic capital management. By the capitalization of risk, the system realizes all-around measurement of risk and the utilization is more and more popular and becomes widely accepted risk management pattern by international banking. Economic capital management is frontier theory of commercial banks' risk management and symbols the core of risk and value management for future.From the structure this thesis about economic capital management can be divided into four large parts and seven chapters:The first part is fundamental theory including Chapter One and Chapter Two. Chapter One is exordium and mainly introduces this thesis' research background and meaning and also gives the innovation points. Chapter Two mainly analyzes relative concept, developing course and theory about economic capital, and introduces research results about economic capital at home and abroad.The second part is the measurement study of economic capital, including content from Chapter Three to Chapter Five. Chapter Three discusses about measurement of credit risk and analyzes strongpoint and shortcomings between traditional and modern measurement methods. This thesis chooses credit risk measurement model based on CreditMetrics and uses Mont Carlo Simulation methods to help do the empirical study. Chapter Four is about measurement of market risk and introduces standard method and internal model method of measurement of commercial market risk. The thesis gives an empirical example using historical simulation method and compares the results with the standard method. Chapter Five is about measurement of operational risk. This chapter analyzes and compares Indicator Method, Standard Method and Internal Model Method for operational risk recommended by Basel Committee and uses China's banking industry as a whole sample to do the empirical study.The third part is Chapter Six and is mainly about the application of economiccapital management. The application area includes loan pricing, performance measurement and capital allocation management. This chapter introduces traditional loan pricing patterns and its own characteristic and applicability, points out the present condition and the weak points of domestic loan pricing, and gives an example to show the advantage by using economic capital. This chapter also introduces RAROC and SVA models, which is widely used for commercial banks' performance measurement both for institutions and individuals. At last the chapter discusses about the application of economic capital in commercial banks' capital allocation, introduces basic patterns of economic capital allocation and brings forward optimizing method of economic capital allocation for commercial banks.The fourth part is Chapter Seven and mainly studies the practice of economic capital management in China and gives revelation. This chapter compares the practice and problems of economic capital both at home and abroad and gives suggestions according to this thesis' study viewpoints.