Research On Allocation Of Economic Capital Of Commercial Banks Based On Raroc

Since the 1990s, the methods of risk management of commercial banks have been transformed into modern comprehensive risk management from asset or liability management, and all commercial are positive to search fitting methods of risk management. RAROC system is schemed out as the result of commercial banks'need, which takes banks'earnings, capital and risk together. RAROC system of economic capital, as advanced method, can not only provide basis for banks'business, but also are important standard for strategic planning. The research of international advanced banks on RAROC system has come into one scientific system, which including three parts:economic capital counting, allocation of economic capital and performance evaluation. In its application, RAROC system has been applied to all walks of risk management and become important basis for risk management and business evaluation. The research on RAROC system in our country began later than abroad and the application of RAROC system has been initial stage. The methods of economic capital accounting adopted by our commercial banks are rough which limited effects of risk management.Under this background, the thesis includes four part around economic capital. The first part, the introduction, basically introduce the background, the status and result on RAROC system home and abroad. What's more, this part illustrates the structure and innovation. The second part, economic capital definition and the system of RAROC, firstly illustrate the concept of economic capital from vertical and horizontal angles and generalize the special characteristics of economic capital contrasting to account capital and regulatory capital; then, introduce the contents of the system of RAROC systematically and intensively and advantages of this system. The third part is the most important which basically illustrates the methods of allocation of economic capital. In the process of mathematical reasoning, marginal economic capital of all business equals each other when allocation of economic capital is optimal. The defects in this process are as follows:it does not prove the constraint function has derivative everywhere and the conception of marginal economic capital is abstract in concrete application. These defects consist into the major content of this part. After illustrating the frame of RAROC system and the process of mathematical reasoning, the thesis construct risk indifference curve and earning curve, by means of the theory of consumer utility optimization, in order to realize the optimal allocation of economic capital by using Zgrapher software. So this method is feasible theoretically. Then the thesis test the method with the earning data from three-year national debt, Shenzhen Stock index (000001), Zhongmu corporation (600195) and ICBC(601398) as four assets for commercial banks. The fourth part generalizes the three advantages and three characteristics concerning this method and give an method for the accounting one asset's economic capital in portfolios considering risk diversification which can be give an direct standard for commercial banks to choose business. The fifth part, RAROC system's application in our commercial banks, illustrate the situation of RAROC system's application in our commercial banks and analysis the pressing situation the banks face to improve the economic capital management. The thesis analyzes three parts of the problems about economic capital management and advance the corresponding advice.As far as the research methods, this paper definite the concept of economic capital with vertical and horizontal comparison and prove the technique theoretically as well as practically. In the end, though comparing the differences home and board, the paper points some insufficiency. The major part of this thesis is the third part that, to made the process of allocation of economic capital concrete and clearly, proves the method with the model of consumer utility optimization.However, owning to the limitation of the author's theoretical knowledge, the paper do not construct the three-dimensional model of allocation of economic capital, and the content concerning the construction of commercial banks' organization is also not enough.