The Study On Construction And Application Of Corporate Loan Default Models For Chinese Commercial Banks

The core of the New Basel Capital Accord which just implemented in Group of ten in 2006 is the Internal Rating-Based Approach (IRB Approach), which is around about the credit risk management. Based on calculating the expected loss and unexpected loss, the IRB Approach can help the commercial banks to control the risk through identifying the size of loan provision and allocating economic capital and so on. In 2008, China Banking Regulatory Commission clearly pointed out that the banking should implement the IRB Approach in essence, enhance the application of IRB Approach and increase the commercial banks'abilities about distinguishing,calculating and monitoring the credit risk. Both the primary and the senior IRB Approach want the commercial banks to estimate the default possibility by themselves. As one of the crucial parameters which used to quantify the credit risk, the accurateness of the default possibility determines the ability of commercial banks to reduce the credit risk. The aim of this dissertation is to construct the default models in order to estimate the default possibility effectively.At first, this dissertation introduces the theories about credit default and survival analysis, defines the concepts of default and default possibility of corporate exposures, then elaborates the fundamental principles of survival analysis and points out the feasibility of the survival analysis which applied in credit risk management. Second, based on survival analysis's life table, the dissertation constructs the loan default table method. After introducing the basic principle of life table method, this dissertation analyses the prerequisites for developing life table method to loan default table method, then uses this method to do the empirical analysis. Based on it and combining the Credit Risk+ model, this dissertation calculates the expected loss and unexpected loss of one loan portfolio. Third, based on survival analysis's hazard proportional method, this dissertation constructs the default proportional model. After introducing the basic principle, the dissertation puts forward the prerequisites for developing it into default proportional model and uses the model to do the empirical analysis. And based on this model, this dissertation also calculates the expected loss and unexpected loss of one loan portfolio. At last, this dissertation compares the two default models and proposes some suggestions about the application of them. The comparative analysis shows that loan default table method is more suitable for the commercial banks which have sound credit rating system than default proportional model. And in the real operation, the commercial banks can combine the two models effectively. This dissertation proposes some suggestions to help the commercial banks apply the two default models effectively including implementing the loan quality classification strictly, improving the credit rating system, making the data warehouse perfect and strengthening the credit culture of the commercial banks .As the globalization of finance and the increasement of risk, the effective credit risk measurement system is very important and necessary to the commercial banks. From the above research, the applications of default models in Chinese commercial banks to calculate the credit risk are feasible and have the future prospect.