A Study Of Management For Interest Rate Risk And Credit Risk Of Banks

While Chinese banks integrating into the global economic gradually, the risk of banking system has become increasingly complex. Constructing an effective and comprehensive risk management system to raise the overall level of risk management has become a serious problem for commercial banks.The New Basel Capital Accord stress that the bank must establish a good stress test program and conduct regular stress tests to reflect the different economic environment that change the scenario of the credit portfolio.This paper analyzes the combined effects of credit risk and interest rate risk using stress testing. It Describes that the concept of commercial bank's credit risk and interest rate risk, status, causes and management; the basic concept of stress tests, analysis procedure, the necessity and feasibility of implementation. After several practices and simulation, the related macroeconomic factors are domestic nominal GDP growth and consumer price index. This article takes the stress test analysis with hypothetical scenarios, which assume a certain number of macroeconomic factors change because of some reasons. In the empirical analysis, it uses the following method. First it assumes that the credit risk and interest rate risk are independent, and it studies the credit risk and interest rate risk on the impact of macroeconomic factors which change a lot. Then considering the correlation between the two kinds of risks, it studies the real change of credit risk and interest rate risk while macroeconomic factors change. And it compares the two results. In the credit risk, this paper sets overdue loans ratio as a credit risk indicator,uses LOGIT equation transferring it into a composite indicator which could reflect the banking system's default probability and then establishes linear regression model with macroeconomic factors using the data of Shanghai Pudong Development Bank; in the interest rate risk, this paper uses the one-year loans interest rate analysis on how macroeconomic factors could effect. The results show that the credit risk and interest rate risk are related to each other. If ignoring this correlation, the banks will underestimate losses. Stress testing can be better to solve the problem. Therefore, commercial banks should consider the links between these risks, pay more attention to this method and carry out the stress testing.