The Analysis On Risk Of Chinese Commercial Bank Based On Standardised Approach

Finance is the core of modern economy and the commercial banking system is the core of the financial system. Commercial banks as a special enterprise which managing currency; rely on risk to achieve their income. The commercial bank is the main body to create currency, and its business activities are closely related to overall economic stability and growth. It held most of the social savings; poor management will affect many enterprises, the financial situation of families and individuals. Because of these special reasons, their decision had to be monitored to ensure its business goals while meeting the mobility, safety and profitability. In order to satisfy regulatory requirements and its development, it is necessary for commercial banks to manage the risks in their operations.In their centuries-long process of development, western commercial bank has formed a clear distinction of clear ownership and operational objectives, advanced management tools, business innovation and business diversification and internationalization features. Many Chinese banks should learn from them. Nevertheless, since the breakup of the Bretton Woods fixed-exchange-rate system, the international banking has experienced ups and downs in the past 20 years. Most countries in the world and had experienced one or more serious risk or systemic banking crisis.The Basle Committee makes up of people form the West central Bank of 10 major industrial countries and on Banking Supervision departments in order to avoid collapse risk. The Basel Committee brought forward the Basel capital standards in 1988, which is provisions of the banks in Group of 10 held by the international bank capital of no less than 8% of total risk-weighted assets. With the commercial banking business, the business model, the central bank's risk management and regulatory practice and financial markets had been undergoing tremendous changes, these standards were not adapted to today's complex and ever-changing financial system. So after years of efforts, the Basel Committee issued a new Capital Accord. New Capital Accord will cover all the risks of banks.In China, with the ever-changing business environment and the increasingly intense competition among banks, especially the impact of global financial liberalization and integration, the risks of commercial banks is increasing. Risk management gradually rise to an important component in commercial banks. However, commercial banks in China is far from perfect, all kinds of management problems still exist. Risk management Commercial Banks is still in the initial stage. There is not a model for the promotion. So this study was to focus on the actual situation of Chinese commercial banks and its risk management problems, brought forward the idea of actualize the new Capital Accord Standards Approach or internal model law. Through the implementation of the new Capital Accord, to effectively in preventing and avoiding the spread or transfer risk, and thereby reduce losses of reserve.Our commercial banks are facing a severe financial crisis situation. It makes us realize the urgency to enhance risk management of commercial banks. More and more scholars began to enter this field of study. In this paper, "China's commercial banks based on the standard method of risk analysis" as its theme-related research.Chapter 2 introduces the course of development of the commercial bank's risk management and the new Basel Capital Accord and the influence to risk management of commercial banks. Development of international banking risk management broadly experienced the following stages:1. At the beginning of early 1980s, Banks in general are beginning to pay attention to the prevention and management of credit risk due to the debt crisis.2. 20 since the 1990s with the rapid growth of derivative financial instruments and transactions, market risk have become increasingly prominent.3. After the 1990s, some of the major commercial banks realized that credit risk is still the key to understanding the financial risks and therefore heavy emphasis on credit risk management. 4. Since the late 1990s, the development of a comprehensive risk management has become a new trend.New Capital Accord had greatly affected risk management of commercial banks. New Capital Accord divided risk into three main types: credit risk, market risk and operational risk. As the new bank's capital micro comprehensive agreement very broad and specific risk management, it helps the bank to establish of a comprehensive risk management system. the new Capital Accord include three pillars, the main contents of the first pillar capital adequacy ratio requirements considered overall risk when calculating capital adequacy ratio requirements of the banks. The second pillar-the supervision and examination of the regulatory authorities, the third pillar-market constraints. If the second pillar of the bank's overall risk is the industry regulator, overall risk market discipline is the community bank supervision. Therefore, the combination of the three pillars of the new Capital Accord, banks can change from a macro perspective of a comprehensive risk management.Chapter 3 analyzes the development of our risk management and risk management of commercial banks in China. The history for risk management of Chinese banks can be divided into four phases, credit risk management fund management, credit management, management of the five-level loan classification, IRB exploration. Generally speaking, credit fund management compatible with a planned economic system in the early days, and have not quantified the basic management functions. The following five-category classification of loan management and credit management is the initial stage of quantifying credit risk management, but it is still at the stage of determining the nature.Chapter 4 introduces the main content of new capital accord and Standardised approach, including market risk, credit risk and operational risk. Market risk is making up of interest rate risk and stock risks in trading books, the foreign exchange risks and commodity risk. The first method to calculate market risks are calculates each risk capital requirements, such as interest rate risk, price risk, then add them up. Credit risk is possibility of the deviation between the actual receipts and the expected proceeds during the operation process of commercial banks, because of unpredictable factors of uncertainty. Thereby obtain additional income opportunities and possibilities of loss. The new Capital Accord of the Bank of Credit Risk Measurement Standards Act, provides 0, 20%, 50%, 100%, 150% risk weight, the standardized approach using external rating agencies (such as Moody's Standard & Poor's and other rating companies) or export credit agency ratings to be assessed the debtor's credit rating. Operational risk is defined as the risk of losses resulting from inadequate or failed internal processes, people and systems, or external events.In Chapter 5, we mainly analyzed the difficulties to apply the standardised approach and how to overcome these difficulties, and the feasibility of actualizing the standardised approach. The main difficulties in actualizing the standardized approach are unable to meet the required data, the lack of ratings system and the lack of internal and external risk management personnel. The suggestion is improve external and internal rating system, data warehouse and attracting various talents. Through the analysis of the feasibility, the standardized approach can be implied in China.