Simulation Study On Chinese Commercial Banks' Internal Credit Rating System Based On The Bonus-Malus System

Credit rating is the result from impartial and professional credit rating agencies which valuate the enterprises'credit. When general enterprises come to commercial banks for loans, if the commercial banks know nothing about their credit, then there comes large risk for commercial banks. As a result these enterprises are difficult in financing or have to pay high risk premium in order to get loans. Therefore without a reference index of credit quality in capital marker, the fund will not be fully effective. However, the credit rating built the information bridge cross the investors from the borrowers, which lower the risk of invest and maker the operation of capital markets to smooth. The Bonus-Malus System (BMS) is a discount of the insurance premium that is given on the renewal of insurance policy if no claim for compensation is made in the previous year.This dissertation focuses on the simulation study on Chinese commercial banks' internal credit rating system based on the bonus-malus system. At first, this dissertation try to find out some factors in commercial banks credit rating system, then build a commercial bank's internal credit rating system model based on principal components factor. After that, this essay try to introduce the bonus-malus system from automobile insurance into the credit rating, at the same time gives system dynamic model and simulate the credit rating model, which compare the BMS based on default number with default quantity. Finally this dissertation gives some suggestions for the Chinese commercial banks.