The Research On Asymmetric Information And Credit Risk Measurement Of Commercial Bank

Credit risk, market risk and operational risk are known as the three major risks of the modern Banks.The complexity and destructive nature of credit risk is far more significant than the other two. It exists in the socio-economic life every time ,jeopardizing the financial stability and the development of the national economy. Each participant in the market economy could not escape it. With the acceleration of the revolutionary pace of China's financial system and the degree of opening up of the financial industry, the domestic banking is faced with the challenge of participation in severe international competition.Under the new situation of globalization of the financial industry, strengthening our credit risk management of commercial banks and narrowing down the gaps with foreign counterparts have become the most significant issue for China's financial industry.However, nowadays scholars have not reached an agreement on the concept of credit risk, which affects the research on the credit risk of banks. Therefore, we first analyze the various definitions of credit risk put forward by scholars and find that traditional definitions on Credit Risk are unable to explain the new features and changes in risk in the contemporary era.Traditional credit risk is from the commercial bank loans, which have the nature of poor mobility, lack of an active secondary market as securities. The value of loan assets is normally calculated by the historical cost rather than the contemporary market value.Although credit risk can be translated into two Chinese versions, but we clearly distinguish these two versions. And among all the concepts, this paper is in favor of the view of focusing on the city, which holds that the credit risk include not only the risk of default, but also the risk of losing at the alteration of the creditor's value of assets, caused by the change of the creditor's credit condition and his ability of fulfillment of the contract.The research on Credit Risk Measurement Methods is a hot financial topic at home and abroad. Credit risk not only shares the general characteristics of a financial risk ,such as uncertainty, transmission, proliferation, concealment and outburst, but it also has it own feature, such as partial probability distribution, difficulty in knowing the condition of the risk and its changes, risk of unquantifiable and less observation data in credit risk, etc. The majority of Chinese enterprises are private companies whose disclosure of information is not sufficient, so in order to obtain bank loans, the enterprises would be motivated to whitewash their own financial statements. So we argue that banks first have to solve the information asymmetry problem, because the research on Credit Risk Measurement Methods is valuable only after they get the adequate and reliable information.Stiglitz and Weiss have studied credit market of asymmetry information and their research shows that when banks are faced with the asymmetric information, they will used the credit rationing to solve it, which is the rational economic behavior. This paper analyzes credit rationing in two situations: the bank as the price makers and as the price recipient, and we argue that credit rationing is not an effective solution for asymmetric information, and the behavior it describes is too simple. The relationship between banks and enterprises is a process of many chess games. So we can establish a reputation model to record the enterprises'credit behaviors, and then inspire the enterprises to reveal their own credit information. Besides, perfecting the idea of financial supervision and setting up small and medium banks to loan for small and medium-sized companies would also eliminate the problems of asymmetry information.This paper introduces the development history of the credit risk measurement model. The traditional model includes expert method, credit ranking method and credit scoring method. The KMV model is combined risk management model, which applies the specific Mathematical statistic way to predict the function of the probability dense of the causing risks from the historical data, and then becomes a way to control credit risk by scientific prediction of the possible future lose. Credit-Metric,CreditRisk+,KMV models are all the most commonly used assets combined risk quantifying management models and those models are all recommended by the new assets protocol, in which KMV model is the most widely used one. KMV model is only applied to the public enterprises, which confines its further application. We argue in this paper that KMV model can also be used in private companies to measure its probability of default after some proper treatment of the data. And our method is to use the asset volatility of the public companies to stand for the private companies', taking advantage of Discounted Cash Flow model to measure the assets value of the private companies. This paper proves this method to be applicable by the loan data of the Jiangmen City branch of the Industrial and Commercial Bank of China...