Development State Of The Debt Rating System And Its Role In Risk Management In Bank Of China

With the restriction of the more strict risk monitoring and measurement in the modern economic life, customer debt rating is unable to reflect the risk level precisely, and hardly meets the risk management requires of modern commercial banks. As an essential part of internal rating system in modern commercial bank, debt rating has become the basis of risk management of bank credit assets, going to the frontier of internal rating system. In order to subdivide and rank the risk efficiently, the New Basel Capital Accord (also known as Basel II) officially released in June 2004 highlights the importance of Internal Rating-based Approaches (also known as IRB Approaches) in risk management and capital regulation. It also advocates commercial banks establishing internal rating system which consists of debt rating and customer debt rating on the basis of internal data and management standards.In 2008, China Banking Regulatory Commission also put forward clear regulation requires the implementation of the internal rating system in commercial banks. With the implementation of the Basel II, the internal rating system consisted of debt rating system and customer debt rating system in commercial banks. turned from customer debt rating system to the two-dimensional rating system. Taking Loss Given Default as the base, debt rating system in Bank of China quantifies losses of default risk in each debt, combined analytical judgments of Probability of Default in customer debt rating system. How to promote the practice of debt rating and build up a more perfect risk management system in China has become an important topic of bank industry in our country.As the highest degree internationalization of domestic commercial bank, Bank of China firstly introduced debt rating system into its branch BOC in Hong Kong. Bank of China presents the tentative of extensive use of debt rating in China's commercial banks. Based on the development research of the debt rating system in Bank of China, including the overall operation process, this article concentrates on the background and operation pattern of debt rating, the differences and contacts between customer debt rating, five levels of categorization and debt rating .Then, it focuses on how an important role the debt rating system could play in the internal two-dimensional rating system of bank. Therefore, we could find out the problems which debt rating system would settle out for risk management of bank credit assets in Bank of China. This thesis also put forward the suggestion that how to promote the effective use of debt rating system. The thesis includes three parts. PartⅠdisplays the construction situation and operation process of the debt rating system in the Bank of China, through analysis of its function in each link, taking the example of the debt rating system in the Bank of China. PartⅡexplains the background and operation pattern of debt rating, the basic principle of debt rating, the differences and contacts between customer debt rating, five levels of categorization and debt rating. PartⅡalso discusses the necessity and possibility of establishing debt rating system to show the central idea of this article. PartⅢdeeply analyzes the necessity of the debt rating system to the two-dimensional rating system, finds out the function of debt rating system in risk control and post-loan management. Standing in the development of a highly thorough, it also put forward the proposal of how to improve the debt rating system.Through discussion and analysis the article draws the following conclusions. The internal rating system consists of debt rating and customer debt rating. The application of debt rating and customer debt rating system reflects the risk condition of clients and trading more accurately. Debt rating makes up for the shortage of customer debt rating for more comprehensive evaluation of loan risk. It plays an auxiliary role in the field of loan pricing, risk control, capital measurement and post-loan management. The operation of debt rating system plays an active role. It realizes early warning of the risk, comprehensive evaluation of the customer's credit. According to different result of debt rating, the commercial bank can take appropriate measures. Debt rating has some positive significance in relation to increasing risk consciousness, adjusting measures of risk management, establishing risk transmission and early-warning mechanism, strengthening post-loan management. Reflection on the problems in the operation of debt rating system, it hasn't been full used in the field of the whole process of risk control and data sharing. It is suggested that debt rating system should be used in the whole field of risk management concluded of the investigation, the examination and the post-loan management.Every stage collects data according to the historical data and the development of the client. Adjust the debt rating data according to the data of customer debt rating, and Adjust five levels of categorization data according to the data of debt rating. Assess the risks more accurately with the data share. With the maturity of the debt rating system, the bank of china will further increase the depth of business application, brings debt rating better service in the field.