Research On Economic Capital Allocation Of China's Commercial Banking Under VaR Restraint

Capital is not only the guarantee in maintaining the public confidence to the commercial banks, but also the last line of defense in resisting all kinds of risks. Banking capital management theoretic , whose objective is to make use of and to allocate bank's capital reasonability , effectively , low-costly , to decrease risks and to increase proceeds of capital , is one of the important subjects researched by the western countries' banks , and also a unique filiations of the financial theoretics .The Basel council passed the New Basel Accord on capital in June 2004, which is so called BaselⅡ. Although we expressed that we would still imply the old Basel Accord several years after the time when the Group of Ten begin to carry out the new in 2006 , implement of new accord still bring a series of influence and examination on China's commercial banks . We have fulfilled our promises which we promised when we join the WTO in 2001, that was to realize our banking be open overseas entirely at the end of 2006 and the foreign bank came into our banking institution entirely then. In face of the more and more furiously competition from inter-bank both home and abroad , also based on the more and more complex financial environment and competition ,how do we do to realize use of theory of capital management effectively , and allocation of EC capital effectively ? How do we do to improve our core power in competition while to strengthen our ability to resist risks and improve our level in risk management?The object of economic capital is to realize proceeds of the shareholder to the most extent, while balance risk and income of commercial bank. Along with rapidly development of financial market and more complex risk, commercial banks think much of risk and value management, especially EC management. In this practice use of EC is more and more popular. EC management has important signification to improve level of operation management and to strengthen risk management.The paper is just about performance evaluation of the commercial bank based on EC management and EC allocation .There are three parts, that is five chapters, making use of the logistic order from simple to complex and from theoretic to practical, which expound EC theory and its applications in China's commercial banking.The first part contains the first, second and third chapter. The first chapter is the preface, including background and meaning of the paper; research fruit on such theoritics both home and abroad; framework and line of thought of the paper, and innovation of the paper .Introduction of EC theoretic system, especially theory of EC allocation, and RAROC evaluation model based VaR in the second and third chapter .These three chapters is as the basic theoretic preparation for the second part, which is also the most important part in the paper.The fourth chapter is just the second part of the paper .This chapter contains three parts, including the significance of implying EC management to China's commercial banks; problem and obstacles existed during the implying process of EC management in China; setting a model frame to analyze the bank performance via RAROC based on one commercial bank's data in China and a conclusion. The object of this chapter is to testify the must needs to imply EC management effectively to China's commercial banks.The last chapter, that is the third part, is conclusion of the paper. In such chapter we search for the effective measure fit for China banking circumstance to improve our commercial banks'EC management level via above analysis and from the experience of foreigner banks.