Commercial Banks Economic Capital Management And Performance Appraisal

In the context of highly open financial markets and increasingly complexity of financial risk, the knowledge and understanding of risk and capital management is being deepened constantly. By learning from the experience of foreign advanced banks, Chinese commercial banks actively explore risk management instruments and form an entirely new measure-economic capital management, which reflects the new concept of modern commercial banks'value management. It fairly solves the problem of how to match risk and profit and fully performs capital's function of withstanding risks and creating economic value. Therefore, it is gradually developing into the main trend of commercial banks'risk management in the world. Currently, the domestic research and application of economic capital management is in the initial stage, especially in Chinese commercial banks. Consequently, the research of commercial banks'economic capital management not only has theoretic value, but also has very important practical meaning.By ways of theory and practice combination, this article elaborates the meaning and function of economic capital and investigates its measurement and allocation method, then analyzes economic capital's application in performance evaluation with RAROC and EVA as main analytic indicators. Through comparative analysis, case studies and empirical research, this article puts forward application process of economic capital management which is suitable for Chinese commercial banks. Moreover, taking a branch of one commercial bank of China as an example, the article deeply analyzes the application situation of economic capital management and its implementation in performance evaluation. On this basis, it appraises application effect and points out existing difficulties and deficiencies, and further puts forward improved measures and suggestions. These discussions provide useful reference for the application of economic capital management in Chinese commercial banks.