Research On Application Of Modern Credit Risk Management Technique In Chinese Commercial Banks

Managing credit risk is particularly important in commercial banks. For a longtime, hampered by internal and external conditions, the effect of risk management,including credit risk management, is poor in Chinese commercial banks. Chinesecommercial banks rarely use quantitative approach in managing credit risk. Themain approach, which Chinese commercial banks use in managing credit risk isqualitative. In contrast, modern credit risk management technique mainly based onquantitative analysis. The purpose of this thesis is to discuss the possibility ofapplying modern credit risk management technique in Chinese commercial banks.The thesis is divided into 6 chapters. In chapter 1, the writer brings out thesignificance of the research of the paper. Meanwhile, the writer discusses the root ofloan risk and the mechanism cause of the formation of loan credit risk in Chinesecommercial banks. In chapter 2, the author illustrates the concept and profile ofcredit risk in view of modern finance. In chapter 3, the writer introduces the basicprinciple, primary approach as well as metric and limit of four of modern credit riskmeasuring model, that is CreditMetrics of J.P. Morgan, Credit Portfolio View ofMcKinsey, Credit Monitor Model of KMV company and Credit risk+ of CSFP. Atlast of this chapter, the writer discusses limitation of applying modern credit riskmeasuring model in Chinese commercial banks, then point out steps to avert theselimitations. In chapter 4 the author illustrates approaches to deal with credit risk,mainly focus on two important instrument—securitization and credit derivatives.The author constructs a framework of functional system of credit risk managementin Chinese commercial banks in chapter 5, and introduces the constituent of thisfunctional system. In accordance of the framework of functional system of creditrisk management mentioned in chapter 5, the author carries out empirical study inchapter 6, try to measure credit risk of sample loan portfolio using real loan data andmarket parameters, then gives marginal analysis and performance appraisal tosample loan portfolio according to the result of credit risk measuring.