A Study On Insolvency Risk Management Of Chinese Banks

Operational risk, credit risk and market risk are considered as the three major risks of commercial bank in Basel Capital Accord. In reality, no matter the risk form that commercial bank displays, as long as the certain risk is enlarged unlimitedly and the various risks integrated out of bank's control, the bank will go bankrupt because of the due debt which it can not pay in time. Eventually, it will be eliminated by the market. The insolvency risk reflects the operating situation of commercial bank in all aspects. On the research of it, the operators and regulators will convince the risk of bank and adjust the operating or regulating strategy in order to keep the commercial bank developing healthy.The dissertation will talk about the resource of insolvency risk and introduce the research situation of foreign and domestic separately, which shows that it is a significant research to do with the insolvency risk of commercial bank. Besides, the article calculates the index of insolvency risk.First, according to traditional insolvency risk index formula, the dissertation measures the index using annual financial data of China's banking industry from 1994 to 2004. Then, the author improve the former calculating formula based on Basel Capital Accord, which means, using"weighted risk asset"instead of"asset"and using"more extensive capital"instead of"capital". And the index will be recalculated. The result shows that the insolvency risk of commercial bank and policy bank is smaller than joint stock bank. After the adjustment of formula, the insolvency risk of commercial bank is also lower than joint stock bank except the Agricultural Bank of China,China Ever-bright Bank and CITIC Bank which fail to meet the prudential requirements.On the basic of the measurement, the dissertation analyses the reasons lead to insolvency risk of our banks, calculates the insolvency risk index, researches empirically from macro parts and micro parts, uses SPSS statistical software to do regression analysis, and eliminates the variables which do not remark to the regression result step by step. Finally, the article finds out the eight factors which have a remarkable influence to insolvency risk index and explains them. At the end part, the dissertation discusses some suggestions how to improve the discharging ability of bank.