Research On The Construction Of Internal Rating-based System To Credit Risk In Tianjin City Commercial Bank

Credit risk is one of longest standing risk species in the domain of finance, as serious as its potential losses are, credit risk is the primary risk to commercial banks. That is also the reason why internal quantificational rating system means the vital significance to all commercial banks. In order to measure the status of risk assets in a bank, this bank must rate those assets, and ascertain corresponding risk weight as well. To commercial banks in China, it is a crucial task that how to construct and consummate their own internal rating-based systems or plans. New Basel Capital Accord which will be issued on the year of 2006 provides new methods to quantify credit risk– standard method and internal rating-based method (IRB). Basel Committee definitely mentioned every item of basic principles in the new Capital Accord will be applicable to all commercial banks in the world, and it also encouraged using IRB method to those banks which have had high level management. Applying internal rating-based method will make it possible that banks exactly measure their risks and enhance sensitivities to those risks. In general words, internal rating-based approach reflect advanced experiences of risk management in the international banking industry; it should be inevitable selection on the way to consummate risk management system in Chinese commercial banks.This paper utilized relative theories in Economics, Finance and Statistics to analyze the construction of internal rating-based system in Chinese commercial banks to credit risk evaluation. Based on collecting and researching dozens of resources on risk management experiences in domestic and international banks, this dissertation presented an overall description on Basel II Accord and its internal rating-based method in the first stage. Comparative analysis, theoretical models and demonstration research are alternately used to analyze risk management in commercial banks, typically to treat the status quo of credit risk management in Tianjin City Commercial Bank. Further, relying on the references of experiences and success of internal rating-based method in foreign banks'quantificational credit risk system, this paperhas contrastively researched a few great models of credit risk quantification, and then argued necessity, system design and selection of models to the construction and amendment of banks'internal credit risk rating-based system. Finally, combined with practice of Tianjin City Commercial Bank, this report demonstrated model design and business process of this bank for its own internal rating-based system; and gave some advice on founding this system.