Credit Risk Management Of Banks In Terms Of New Basel Capital Accord

In order to keep pace with the financial development, and to adapt to the changing environment and supervisory conditions for the international banking business, in June, 1999 the Basel Bank Supervision Committee released a draft open to comments with revisions to the 1988 version, and the draft was also known as the New Basel Accord. On April 29th, 2003, the Basel Bank Supervision Committee released the third draft of New Basel Accord, which posed even greater challenges for commercial banks and supervisory authorities throughout the world. Major modifications were made in the draft, including the "three pillars" of minimal capital requirement, supervision review and market discipline.Revolving around the background and implications of the New Basel Accord, Chapter One outlined the framework of the new accord. In addition, we analyze the shortcomings existed in the new accord as well as the influence the new accord has over Chinese banking business, so as to make a good start for the discussion about the practical choice for Chinese banking industry in face of the New Basel Accord.Chapter Two unfolded the topic of the choice between two risk measuring approaches provided in the new accord. The New Basel Accord gave two methods for risk measurement in terms of capital requirement: the Standardized Approach and the Internal Rating Based Approach (IRB). The Standardized Approach uses the external rating results to calculate...